Banks, credit unions, and brokerages all sell CDs, and the choice depends on how much you want to deposit and whether you value personal service or the highest rate

You can buy a CD from a bank, a credit union, an online bank, or a brokerage firm. Each type of seller offers different rates, minimum deposits, and ways to manage your money. A traditional bank branch lets you walk in and speak to someone. An online bank typically offers higher rates because it has lower overhead. A credit union may offer competitive rates if you are a member. A brokerage lets you buy CDs from multiple banks in one account, which can be useful if you have a large amount to invest.

The CD itself is the same product no matter where you buy it — you deposit money for a fixed time period and receive a set interest rate. The difference is in the rate you receive, the minimum amount required to open the CD, and how easily you can access your money before the term ends.

Key Takeaways

  • Banks and credit unions sell CDs directly, while online banks and brokerages also offer them, often with higher rates than brick-and-mortar branches.
  • Minimum deposits range from as low as $500 at some online banks to $10,000 or more at traditional banks, depending on the institution.
  • Online banks and brokerages typically pay higher interest rates than traditional bank branches because they have lower operating costs.
  • A brokered CD purchased through a brokerage firm may have different early withdrawal penalties and FDIC insurance limits than a bank CD.
  • Comparing rates across multiple institutions before you buy is the most direct way to find the CD that fits your savings goal and timeline.

Traditional banks and their CD offerings

Most people have access to a traditional bank branch in their neighborhood or town. These banks sell CDs with terms ranging from three months to five years or longer. The minimum deposit is often $1,000 to $10,000, though some banks set it lower. The interest rate a traditional bank offers depends on the current market and the bank's own pricing strategy.

The advantage of buying from a traditional bank is that you can speak to a banker in person, ask questions, and sign paperwork on the spot. The disadvantage is that traditional banks typically offer lower rates than online banks or credit unions, because they maintain physical locations and staff. If you already have a checking or savings account at a bank, opening a CD there may be simpler because the bank already has your information on file.

Online banks and higher CD rates

Online banks operate without physical branches, which means they spend less money on real estate and staff. They pass some of that savings to customers in the form of higher CD rates. An online bank CD might pay 4% to 5% annually, while a traditional bank branch in the same region might pay 2% to 3%, depending on current market conditions and the specific institution.

To buy a CD from an online bank, you open an account on their website, verify your identity, and transfer money from another bank account. The process usually takes a few days. Online banks require a minimum deposit, which varies — some accept $500, others require $1,000 or $2,500. Your money is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account holder per bank, the same as at a traditional bank.

Credit unions and member-only CDs

A credit union is a nonprofit financial institution owned by its members. To buy a CD from a credit union, you must first become a member, which usually means opening a savings account and meeting any membership requirements — these vary by credit union and might include living in a certain area, working for a specific employer, or belonging to a particular organization.

Credit unions often offer competitive CD rates, sometimes higher than traditional banks but sometimes lower than online banks. The minimum deposit is typically $500 to $1,000. Credit union CDs are insured by the National Credit Union Administration (NCUA) up to $250,000 per member per institution, which is the same protection level as FDIC insurance. If you already belong to a credit union, checking their current CD rates takes just a phone call or a visit to their website.

Brokered CDs and multi-bank options

A brokerage firm is a company that buys and sells financial products on behalf of customers. Many brokerages offer CDs from multiple banks in a single account. Instead of opening a CD at one bank, then another at a second bank, you can buy several CDs through your brokerage and see all of them in one place.

Brokered CDs are useful if you have a large amount of money to invest and want to spread it across multiple banks to stay within FDIC insurance limits. For example, if you have $500,000 to invest, you could buy five $100,000 CDs from five different banks through a brokerage, and each CD would be separately insured. Brokered CDs may have different early withdrawal penalties than bank CDs, and the rates vary depending on which bank issued the CD. Some brokerages charge a commission to buy or sell a brokered CD, though many now offer them commission-free.

Comparing rates and terms before you buy

CD rates change daily based on market conditions. A rate that is highest today may not be highest tomorrow. Before you buy, check the current rates at several institutions — at least one traditional bank, one online bank, and your credit union if you belong to one. Most banks and brokerages publish their CD rates on their websites, updated daily or weekly.

When you compare, look at the annual percentage yield (APY), not just the interest rate. The APY includes the effect of compounding and shows you the true return on your money. Also note the term length — a one-year CD at one bank might pay 4.5%, while a one-year CD at another might pay 4.8%. Over one year, the difference on a $10,000 deposit is about $30. On a $100,000 deposit, it is about $300. Checking multiple sources before you buy takes 20 minutes and can save you real money.

What happens after you buy

Once you buy a CD, your money is locked in for the term you chose. You cannot withdraw it without paying an early withdrawal penalty, which the bank discloses before you buy. The penalty is usually a certain number of months of interest — for example, three months of interest on a one-year CD. At the end of the term, the bank sends you a notice telling you what happens next. You can withdraw the money, roll it into a new CD at the bank's current rate, or move it elsewhere.

If you buy a CD through a brokerage, you have an additional option: you can sell the CD on the secondary market before the term ends. This means you sell it to another investor, and the price depends on how interest rates have moved since you bought it. If rates have fallen, your CD may be worth more than you paid. If rates have risen, it may be worth less. Selling a brokered CD is different from withdrawing from a bank CD, and the outcome depends on market conditions at the time you sell.

Frequently Asked Questions

Can I buy a CD if I do not have a bank account?

Yes. You can open a CD at a bank or credit union without having a checking or savings account there, though some institutions require you to open a savings account first. Online banks and brokerages also sell CDs to customers who do not have other accounts with them. You will need to provide identification and proof of address to open any account.

What is the minimum amount I need to buy a CD?

Minimums vary by institution. Online banks often accept $500 or $1,000. Traditional banks may require $1,000 to $10,000. Credit unions typically ask for $500 to $1,000. Brokerages usually have no minimum, but the CDs they offer may have their own minimums set by the issuing bank. Check the specific institution's website or call to confirm the minimum before you buy.

Is my money safe if I buy a CD from an online bank?

Yes, if the online bank is FDIC-insured, which most are. Your deposit is protected up to $250,000 per account holder per bank, the same as at a traditional bank. Before you buy, confirm that the bank displays the FDIC logo on its website or call the FDIC to verify the bank's insurance status.

Can I withdraw my money early if I need it?

Yes, but you will pay an early withdrawal penalty. The penalty amount is set by the bank and disclosed before you buy the CD. It is usually a certain number of months of interest. For example, if you buy a one-year CD with a three-month penalty and withdraw after six months, you lose three months of interest. The bank deducts the penalty from your principal before returning the rest to you.

Should I buy a CD from a bank or a brokerage?

A bank CD is simpler if you have a small to moderate amount to invest and want straightforward terms. A brokered CD is useful if you have a large amount and want to compare rates from multiple banks in one place, or if you think you might want to sell the CD before it matures. Compare the rates and terms at both before you decide.