Certificates of Deposit (CDs)

A certificate of deposit (CD) is a special type of deposit account with a financial institution that typically offers a higher rate of interest than a regular savings account. Make sure you are purchasing a “deposit” product issued by a federally insured institution. Not all companies with bank-sounding names are actually banks that are insured by the FDIC. To verify that an institution is FDIC-insured, click on “Find Your Bank” at www.fdic.gov or contact the FDIC’s toll-free Call Center at 1-877-275-3342.

Here’s how CDs normally work: When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned.

Whether you are considering a traditional, fixed-rate CD or one with more complex features, the FDIC has some helpful tips for selecting the right CD for your needs. Before you consider purchasing a CD from your financial institution or brokerage firm, make sure you fully understand all of its terms. Carefully read the disclosure statements, including any fine print. Ask questions – and demand answers – before you invest.

Additional Information:

If you have a complaint about a CD you purchased through a bank, try to resolve the matter directly with that institution. If you are unable to work things out with the bank, you may complain to its federal regulator. Not sure who that is? You can call the FDIC’s Call Center (see above) for guidance.

If you have a problem with a CD sold by an investment firm, you have a couple of options. To submit a complaint against a salesperson who represents an investment firm, contact the Financial Industry Regulatory Authority (www.finra.org or 1-301-590-6500). If your complaint is about a CD or another financial product sold by an investment firm, consult the U.S. Securities and Exchange Commission (www.sec.gov or 1-800-SEC-0330).