Banks, credit unions, and brokerages all sell CDs, and the rate you get depends heavily on which one you choose

You can open a CD at a traditional bank, an online bank, a credit union, or a brokerage firm. Each type of institution offers different rates, terms, and account features. The highest rates are usually at online banks and credit unions, while traditional brick-and-mortar banks often pay less. A brokerage CD may give you more flexibility to sell before maturity, but comes with different rules than bank CDs.

The institution you choose affects not just the interest rate but also how your money is insured, how easy it is to access your funds early, and what happens when the CD matures. Shopping across different types of institutions takes an hour or two but can mean hundreds of dollars in extra interest over the life of the CD.

Key Takeaways

  • Online banks typically offer the highest CD rates because they have lower overhead costs than physical branches.
  • Credit unions often match or beat online bank rates and may have lower early withdrawal penalties.
  • Traditional banks are convenient if you already have an account there, but their rates are usually lower than online alternatives.
  • Brokerage CDs let you sell before maturity on the secondary market, but the price you get depends on interest rate changes.
  • All bank and credit union CDs are insured up to $250,000 per depositor per institution through FDIC or NCUA, but brokerage CDs are not.

Online banks: highest rates, no branch visits

Online banks have no physical locations, which means lower costs for rent, staff, and equipment. They pass those savings to depositors in the form of higher CD rates. Banks like Marcus by Goldman Sachs, Ally Bank, American Express Bank, and Discover Bank are among the institutions that publish CD rates publicly on their websites. You can compare their current offerings without logging in or calling anyone.

To open a CD at an online bank, you visit their website, enter your information, and fund the account by transferring money from another bank. The whole process takes 10 to 15 minutes. You receive statements and maturity notices by email. If you need to withdraw money early, you contact the bank by phone or through their website, and the penalty (usually three to six months of interest) is deducted from your balance.

The trade-off is that you cannot walk into a branch to ask questions or handle problems in person. If you are comfortable managing money online and do not need face-to-face service, online banks are usually the best choice for rate.

Credit unions: competitive rates and sometimes lower penalties

Credit unions are member-owned financial institutions that often pay rates as high as online banks. You must be a member to open a CD, which usually means living or working in a certain area, belonging to a particular employer or organization, or meeting other membership criteria. Some credit unions have opened membership to anyone in the United States, so it is worth checking whether you can join.

To find a credit union near you or one you may be able to join, use the CO-OP Network locator or the Shared Branch locator on the Credit Union National Association website. Once you are a member, you can open a CD in person, by phone, or online depending on the credit union's options. Many credit unions offer early withdrawal penalties that are lower than banks charge, and some waive the penalty entirely if you withdraw within a short grace period after the CD matures.

Credit unions are insured by the National Credit Union Administration (NCUA) up to $250,000 per member per institution, the same coverage as FDIC insurance at banks. If you already belong to a credit union, compare their CD rates to online banks before opening elsewhere.

Traditional banks: convenience if you already have an account

Banks with physical branches — Chase, Bank of America, Wells Fargo, and regional banks — offer CDs at rates that are usually lower than online banks or credit unions. The advantage is convenience: if you already have a checking or savings account at the bank, you can open a CD in the same branch, ask questions face-to-face, and manage all your accounts in one place.

You can open a CD by visiting a branch, calling the bank's customer service number, or using their website. The process is straightforward, and the bank will explain the terms and answer questions. The disadvantage is that you are paying for the convenience of physical locations through lower interest rates. If you are willing to move your money to an online bank or credit union for the term of the CD, you will usually earn more.

All deposits at FDIC-insured banks are covered up to $250,000 per depositor per institution. If you have multiple CDs at the same bank, they count toward the same $250,000 limit, so spreading money across institutions protects larger amounts.

Brokerage CDs: flexibility to sell before maturity

A brokerage CD is a certificate of deposit sold through a brokerage firm like Fidelity, Charles Schwab, or Vanguard. The CD itself is issued by a bank, but the brokerage handles the purchase and holds it in your account. The main advantage is that you can sell the CD on the secondary market before maturity without paying an early withdrawal penalty.

When you sell a brokerage CD early, you receive the current market price, which depends on how interest rates have moved since you bought it. If rates have fallen, your CD is worth more than you paid (because it pays a higher rate than new CDs). If rates have risen, it is worth less. You may make or lose money on the sale, but you avoid the early withdrawal penalty that a bank would charge.

Brokerage CDs are not insured by the FDIC or NCUA. Instead, they are protected by the Securities Investor Protection Corporation (SIPC) up to $250,000 per account at the brokerage. If you are buying a brokerage CD, make sure the brokerage is SIPC-insured. The rates on brokerage CDs are often lower than bank CDs because of the secondary market flexibility, so compare carefully before buying.

How to compare rates across institutions

Start by visiting the websites of three to five institutions: one or two online banks, one credit union (if you can join), and one traditional bank where you already have an account. Write down the rate, term length, and minimum deposit for each CD. Most institutions let you see rates without opening an account.

Use a CD rate comparison site like Bankrate, DepositAccounts, or the Federal Reserve's National Information Center to see rates across many banks at once. These sites update daily and let you filter by term length and minimum deposit. Note that the highest rates often come with higher minimum deposits (sometimes $25,000 or more), so check what you actually need to deposit.

Calculate the total interest you would earn at each rate. A CD calculator on any bank's website will show you the dollar amount. The difference between a 4.5% rate and a 5.0% rate on a $10,000 CD for one year is about $50 — small enough that convenience might matter, but large enough to be worth a few minutes of comparison.

What to check before you buy

Before opening a CD, confirm the early withdrawal penalty in writing. Banks are required to disclose this, but the amount varies widely — some charge three months of interest, others charge six months or a flat fee. If you think you might need the money before maturity, a lower penalty matters.

Check whether the CD automatically renews at maturity and what rate it renews at. Most CDs renew automatically at the bank's current rate for the same term, which may be lower than what you earned. If you do not want to renew, you must contact the bank during the grace period (usually 7 to 10 days after maturity) and withdraw the money or move it elsewhere.

Verify that the institution is insured. Bank CDs should show FDIC insurance; credit union CDs should show NCUA insurance. Brokerage CDs should be held at a SIPC-insured firm. If the institution is not insured, your money is at risk if the institution fails.

Frequently Asked Questions

Can I buy a CD from multiple banks to earn higher total interest?

Yes. Each bank's FDIC insurance covers up to $250,000 per depositor, so you can open CDs at different banks and each one is fully insured. This also spreads your risk — if one bank fails, your other CDs are protected. Many people open CDs at two or three institutions to diversify and take advantage of different rates.

What is the difference between a CD rate and an APY?

APY (annual percentage yield) is the rate you actually earn when interest is compounded. A bank might advertise a 5.0% APY on a CD, which means if you leave the money untouched for one year, you will have 5.0% more than you started with. The APY is what matters for comparing CDs across institutions.

Do I have to keep my money in the CD for the full term?

No, but withdrawing early costs you money. Most banks charge an early withdrawal penalty equal to three to six months of interest. Some credit unions have shorter grace periods or lower penalties. If you think you might need the money, ask about the penalty before opening the CD, or consider a brokerage CD where you can sell on the secondary market.

What happens to my CD when it matures?

The bank will send you a notice a few days before maturity. If you do nothing, the CD automatically renews for another term at the bank's current rate. If you want to withdraw the money or move it elsewhere, you must contact the bank during the grace period (usually 7 to 10 days after maturity) and request a withdrawal or transfer.

Are online bank CDs as safe as CDs at big banks?

Yes, as long as the online bank is FDIC-insured. FDIC insurance protects deposits up to $250,000 per depositor per institution, regardless of the bank's size or whether it has physical branches. Check the bank's website or the FDIC's BankFind tool to confirm it is insured.