All You Need to Know About Certificates of Deposit (CDs)

September 12, 2022 by Partner Colorado Credit Union

When it comes to finding a safe way to let your money grow, you may want to consider a Certificate of Deposit (CD). Interest rates on CDs are usually higher than most savings, checking or money market accounts—giving savers greater earning potential. Here’s a closer look at all you need to know about CDs to determine if it’s the right choice for you.

What is a CD?

A CD is a type of savings account that earns interest on the amount of money you put in for a fixed period of time. Unlike a savings account, the money you put in a CD must remain untouched for the whole term, otherwise you could end up losing interest or having to pay an early withdrawal fee. However, CDs typically have higher interest rates than savings accounts giving the saver more earning potential. CDs are also less risky than stock investments which can fluctuate with the market. At the end of your CD term, you’ll have a guaranteed rate of return.

How does a CD work?

Keep in mind, when you open a CD, you’ll be locking in your money to a set interest rate and term with a minimum deposit required.

Interest rate

CDs generally have a fixed interest rate, meaning the rate won’t change during the term. That’s why it’s important to shop around and find the best interest rate you can before putting your money in a CD. You want to make sure you’re locking in the best earning potential you can at the time.


The term is the length of time you agree to leave your money in the CD. Terms can be anywhere from three months to five years. Each term ends on what is called the maturity date. On the maturity date, you can withdraw your money without penalty or fees. If you withdraw the money before the maturity date, you risk having to pay an early withdrawal fee.

Minimum deposit

Most CDs require a minimum deposit. This is the amount of money you agree to deposit when you open a CD. Typically, CD minimums start out around $500 or $1,000, but could be as much as $10,000 or more. It just depends on the financial institution and the type of CD you’re opening. Once your CD is set up, you’ll receive monthly or quarterly statements just like you would with any savings account showing the interest you’ve earned.

Advantages of a CD

Unlike other investments that can fluctuate with the market, CDs in comparison are a safer investment. Most CDs are federally insured up to a certain limit. The fixed rate gives you a clear picture of what to expect on your return. Plus, interest rates on CDs are typically higher than those on other types of saving accounts. Another thing to keep in mind when opening a CD, if you can choose a longer term, it’s to your advantage. The interest rate is typically higher the longer you keep the money in the CD. 

Disadvantages of a CD

The lack of flexibility can be one disadvantage to a CD. Because your funds are locked into the CD for the term you choose, you can’t withdraw the money whenever you want. If you withdraw the money before your term ends, you’ll have to pay a fee. You want to make sure before you open the CD that it’s money you don’t plan on needing during the term. Another potential drawback could be the interest rate. While there are benefits to a fixed interest rate, there can be disadvantages as well. For example, other investments can fluctuate with the market but with a CD, if rates go up, you’re locked in for the full term of your CD.

If you’re looking for an opportunity to earn more interest than with a regular savings account, and you know you won’t need to access your funds for a certain period of time, a CD might be the right choice for you.

For a limited time, you can open a new Partner Colorado CD and score our highest rates in years, up to 3.40% APY on a 38-month CD!* Plus, IRA CD options to help boost your retirement savings.



*APY=Annual Percentage Yield. The minimum balance to open and earn the advertised interest rates of 2.35% APY for 15 months, 2.85% APY for 22 months and 3.40% APY for 38 months is $500.00. Upon maturity, the 15-month CD will revert to a regular 12-month CD and will earn the APY in effect at the time. The 22-month CD will revert to the regular 24-month CD and will earn the APY in effect at the time. The 38-month CD will revert to the regular 36-month CD and will earn the APY in effect at the time. Penalties will be imposed for early withdrawals. A penalty equal to 90 days of interest will be assessed on early withdrawals for CD terms of 12 months or less, and a penalty equal to 180 days of interest will be assessed for CD terms over 12 months. This includes interest-only withdrawals. Penalties could reduce earnings and principal. IRA certificates are subject to the same penalties and may be subject to additional early withdrawal penalties. Promotional rates are effective as of September 1, 2022. Rates are subject to change without notice. Certain conditions and restrictions may apply.

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