Certificate of deposit accounts (CDs) are time deposit accounts that can be used to fund a number of financial goals. You can find CDs at traditional banks, online banks and credit unions with varying maturity terms and interest rates. There's no limit on the number of CDs you can open but whether it makes sense to open more than one CD can depend on your financial goals and needs.
- A certificate of deposit account is a time deposit account that can be offered by banks, credit unions and other financial institutions.
- There's no regulatory restriction on the number of CDs someone can have, though banks and credit unions might restrict the number of accounts any one person can open.
- Opening multiple CDs could make sense if you're saving money toward more than one financial goal.
- When opening more than one CD, it's helpful to consider the different types of CD options and how each one might fit your financial situation.
Certificate of Deposit (CD) Basics
A certificate of deposit account is a special type of savings vehicle. Also referred to as a time deposit account, CDs allow you to save money for a set maturity term. Depending on the CD, this maturity term may be as short as 30 days or as long as 10 years. While your money is in the CD, it earns interest according to the rate set by the bank or credit union. When your CD matures, you can withdraw all of the money in it or roll it over to a new CD.
CD accounts are generally seen as a safe way to save money. You can earn a virtually guaranteed rate of return and CDs enjoy FDIC protection when held at an FDIC member bank. The Federal Deposit Insurance Corporation offers standard protection of up to $250,000 per depositor, per account ownership type, per financial institution. This coverage is designed to protect savers in the very rare event that a bank fails.
The money you deposit in a CD is intended to remain there until the CD matures. If you take money from a CD before its maturity date, your bank may charge an early withdrawal penalty. Banks can assess a flat fee or penalize you by deducting some or all of the interest earned. The amount of the penalty is typically determined by the CD term.
The amount of money you'll need to open a CD can depend on the bank or credit union's minimum deposit requirements. You may need anywhere from $100 to $1,000 to open a single CD account, for instance. With a jumbo CD, the minimum deposit may be $5,000, $10,000 or more. CD interest rates can vary based on the maturity term and the type of CD.
Banks typically use the federal funds rate to set rates for CDs and other savings accounts. When the Fed raises rates, that can give CD savers a boost but if the Fed lowers rates, CD rates may also drop.
How Many CDs Can I Have?
Technically, there are no federal banking regulations that restrict the number of CDs a person can have. So the simple answer to the question of "How many CDs can I have?" is as many as you need.
You can open multiple CDs at the same bank or at different banks. Opening more than one CD could make sense if you:
- Have several different financial goals you're saving toward
- Are interested in building a CD ladder
- Want to get the best interest rates possible on CDs
- Have sufficient savings to fund multiple CDs
Keeping savings for different goals in separate CDs could be a good idea if your goals have different timelines. Again, CDs can have different maturity terms, allowing for flexibility in saving money for short and long-term goals. So you might open one CD with a 12-month term, another with an 18-month term and a third with a 24-month term, depending on when you think you'll need the money for each goal.
This is in effect a form of CD laddering. A CD ladder consists of multiple CD accounts with varying maturity dates and interest rates. Laddering CDs can help you to avoid early withdrawal penalties if a CD maturity date is always just around the corner. You could also use a laddering strategy to capitalize on interest rate changes if you believe CD rates are likely to rise over time.
There is one caveat to having more than one CD: you'll need to be able to meet the minimum deposit requirements. So, say you want to open five CDs, each of which has a $1,000 minimum deposit. That means you'll need to have at least $5,000 in liquid cash to open those accounts.
Opening multiple CDs could be problematic if all of your money is in those accounts and you don't have any other liquid savings. You may be forced to pull money from a CD early, which means paying an early withdrawal penalty and forfeiting some of your interest.
Some banks and credit unions offer no-penalty CDs, which allow you to take money out before maturity without incurring an early withdrawal penalty.
FDIC Coverage and Multiple CDs
As noted, CD accounts are FDIC insured when held at a member bank. Credit union CDs can be insured by the National Credit Union Administration (NCUA).
When opening more than one CD, it's important to keep FDIC limits in mind. Holding too much money in CDs and other deposit accounts at the same bank could push you over the FDIC limits, potentially leaving some of your funds unprotected.
For example, say you have a checking account, savings account and two CDs at the same bank. The total amount of money in those four accounts is $240,000 and you own them all yourself, with no joint owners. In that scenario, all of your savings would be within the FDIC limits.
Now, assume that your total savings balance across the accounts is $280,000. In that case, $250,000 of your savings would be protected but $30,000 would not. You could, however, make sure that all of those funds are protected by moving some of your savings to another bank.
The FDIC offers an online estimator tool that you can use to calculate your FDIC coverage limits at each bank you use.
Is There a Limit on CDs?
There's no limit on the number of CDs you can have and it's possible to have multiple CDs at the same bank or at different financial institutions. Whether it's appropriate for you to have more than one CD can depend on your financial goals and needs.
Is It Good to Have Multiple CD Accounts?
Having multiple CD accounts or building a CD ladder could be beneficial if it allows you to leverage higher interest rates. You could also use a CD ladder to avoid early withdrawal penalties on CDs.
Can You Have More Than One CD at a Bank?
Banks can and do allow customers to have more than one CD account. Keep in mind that banks may limit the number of CDs a single customer is allowed to have.
CD accounts can be a good way to securely save money that you don't plan to spend in the near term. If you'd like to have more than one CD for savings, it's important to do your research before opening accounts. Specifically, compare the best CD rates to see which banks or credit unions have the most competitive rates. Also, pay attention to maturity terms and fees to choose CDs that are the best fit for your needs.