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If you’re thinking about ways to save your money, consider putting it in certificate of deposit (CD). A CD is a bank account with an interest rate that is generally higher than a regular savings account. CDs typically have a fixed-term length, fixed-term rate and a fixed date of withdrawal, known as the maturity date. They generally have a minimum and maximum dollar amount required to get things started.

CDs were extremely popular in the 1980s and 1990s when interest rates were high, once hitting an all-time high of 18% APY (Annual Percentage Yield). Lower interest rates for the last two decades have diminished consumer interest in CDs, but they're now back in fashion as rates have reached their highest level in 22 years.  

Now that you know what a CD is and what it offers, let’s look at different types of CDs. In exchange for locking in the interest rate, you set it (deposit your money), forget it (don’t withdraw), and let it grow (earn interest) until your CD is fully matured (reached its term). But CDs aren’t one size fits all. Here's a breakdown of the different types of CDs so you can decide which best fits your needs to reach your savings goals.   

Types of CDs 

Fixed-Rate CD

Fixed-rate CDs are the most common. These CDs supply a fixed interest rate for the duration of the CD, which typically ranges from three months to five years.   

This CD often offers a higher interest rate than other types of CDs. While the general rule is that longer-term CDs usually offer a higher return, that isn’t always the case.  An inverted yield curve may result in shorter-term CDs delivering a higher yield.  

Jumbo CD

Bigger doesn’t always mean better, but in this case, some would say it is. Everything that is required (minimum deposit), available (interest rate), and earned (anticipated earnings) from this CD is as it sounds - Jumbo. Jumbo CDs require a higher deposit – typically $100,000 but could be as high as $1,000,000 minimum – but in return, it pays a higher rate of interest equating to more savings.

When you have a bigger nest egg that you’d like to keep in a safe place, you’ll gain more than a traditional CD by opening a Jumbo CD.  

It’s important to ask financial institutions if they have Jumbo CD rates, as not all offer them. 

Liquid CD or No Penalty CD

For a not-so-traditional twist, there is the Liquid CD. Surprisingly, this type of CD takes the disadvantage of CDs and turns it into an advantage. The Liquid CD (also known as the no-penalty CD) allows you to withdraw your money without penalty prior to maturity.  

So, if you need the money before it matures or find a better investment, this could be the CD for you. The disadvantage is that these CDs typically will have a lower interest rate than other types of CDs. 

Bump-Up CD

What if we told you about a CD that can be changed in response to rising or falling interest rates? The Bump-Up or Variable CD will keep your money for a set period but allows you to modify the initial interest rate if you request the change based on the agreed-upon terms.  

The advantage - you can earn more money if interest rates rise throughout your term. The disadvantage – if interest rates do not climb during your term and your yield remains the same or if interest rates fall, the yield may not be the same depending on the terms of the variable rate CD.  

Add-On CD

You may be asking yourself, does "add on" mean what I think it means? Aren’t you locked in with the amount that you initially started with? Usually this is true, but with an Add-On CD, you can deposit more in the account to add on to the principal.  

Since you are allowed to add to your original deposit, be aware of the disadvantages. Add-On CDs generally offer lower interest rates in exchange for your ability to add new funds into the account.   

Note that you should find out how many extra deposits are available to you, as most financial institutions limit the number of deposits you may make based on the duration of the term.  

How do I choose?

Choosing your CD ultimately depends on your goals and how long you want to save. Once you determine your savings goals, you’ll be able to decide on the CD that will help you achieve them. Consider factors such as interest rates, terms, and your financial objectives.