Certificate of Deposit
Certificates of deposit (CDs) can be a good choice when you want steady, predictable investment income that is federally insured.1
Buying a CD in 5 Easy Steps
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For steady, predictable income that is also FDIC-insured, many investors turn to CDs: certificates of deposit. |
What is a Certificate of Deposit?
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What is a Certificate of Deposit?
CDs are bank deposits that pay a stated amount of interest for a specified period of time and promise to return your money on a specific date. They are federally insured and issued by banks and savings-and-loans institutions.
Because they are generally considered safe, CDs can be a considerable addition to the fixed income portion of an investment portfolio.
The Benefits and Risks of a CD
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Certificates of Deposit benefits and risks Benefits Risks Steady and predictable – Lock in an interest rate for a set period of time, while also generally providing a better interest rate of return than a savings account. Broad selection – Choose from different account types and from terms that range from 1 month to 20 years.Insure more money using FDIC coverage – Current FDIC coverage insures each individual bank up to $250,000 per depositor1.Market risk – The most common risk is that you will need your funds before the CD matures. Although there are no early redemption fees, you may receive less than your original purchase price. Call risk – For callable CDs, the issuer can redeem, or "call," your CD from you for the full amount before it matures. The risk is that the issuer will exercise a call option at an unfavorable time for the holder, such as when interest rates decline.
Current CD rates available through Schwab CD OneSource
See below for a selection of today's CD rates
| Maturity Ranges | Rates up to |
|---|---|
| 1-3 Month CDs | 5.56% APY |
| 4-6 Month CDs | 5.58% APY |
| 7-9 Month CDs | 5.69% APY |
| 10-18 Month CDs | 5.70% APY |
Looking for other cash solutions to help you reach your goals?
See rates for cash products at Schwab and compare the features and benefits of each.
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Minimize exposure to interest rate fluctuations with a CD ladder.
A CD ladder is a type of fixed income investment strategy that uses a portfolio of individual CDs which mature on different dates. With brokered CDs, avoid trying to time the market.
Talk to a Schwab Fixed Income Specialist.
Our specialists offer objective, non-commissioned guidance on a wide range of fixed income products and strategies including ladders, bullets, barbells, and more. You can expect personalized service on topics such as:
- Help with choosing from a wide variety of investment options
- Suggestions for adjusting to changing market conditions
- Assistance with using our online trading features
Call 877-903-8069
Have a specialist contact you.
Common questions
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No, as long as you hold it to maturity and don't exceed FDIC insurance limits. CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per bank per depositor or per account type. In the event of a bank failure, holders of CDs issued by the failed institution would be covered up to the FDIC limits, while any amount above those limits would depend on the residual value, if any, of the financial institution. Additionally, brokered CDs can usually be sold prior to maturity. It's possible to receive an amount below the original investment amount if a CD is sold prior to maturity, depending on market conditions.
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CDs generally pay a fixed rate of interest based on the current economic environment. The timing of the payments can vary, but most CDs tend to pay interest monthly, semiannually, or at maturity.
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A ladder strategy helps investors stay invested and takes the guesswork out of timing. If interest rates rise, maturing CDs can be reinvested at higher yields. If interest rates fall, the interest earned from the existing CDs would likely be higher than market interest rates. A CD ladder doesn't take away interest rate risk – but it allows investors to stay invested regardless of interest rates are rising or falling.
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There are a number of ways to manage your cash holdings. Learn about more options for your Cash Investments here. For example, Money market funds are one way to keep your investments liquid while earning high yields, but they have their own unique characteristics that investors need to be aware of.
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We'll help you sell the CD at the current market rate by requesting bids on your CD and contacting you with the highest one. If you decide to sell, you'll receive the bid price plus any accrued interest. There are no guarantees that you'll get what you originally paid for the CD.
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All CDs in CD OneSource are offered by FDIC-insured banks. The Federal Deposit Insurance Corporation insures deposits at FDIC-insured banks. The basic insurance amount is $250,0001 per depositor per insured bank. Each CD you purchase from a different institution is FDIC-insured in aggregate based on ownership type at that bank. For example, if you own two CDs, $250,000 from one bank and $250,000 from a second bank, and you have no other deposits at those banks, you’re covered for $500,000.
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Schwab offers brokered CDs which can be resold through brokerage firms at the market price. If the client wants to redeem before the maturity, the price may differ from the original purchase price of CD, which may result in a gain or loss. Banks offer traditional CDs and often have you forfeit the interest payment to redeem CD early. Bank CDs cannot be held in a brokerage account and must be held in an account with that specific bank.
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