What is a CD and when should I use one?
A CD (certificate of deposit) is a federally insured deposit that locks your money for a fixed term — months to years — in exchange for a fixed APY that's usually higher than a savings account. Use one for money you won't need until the term ends and want to lock in today's rate.
A certificate of deposit is a time deposit: you agree to leave a lump sum untouched for a set term, and in return the bank or credit union pays a fixed APY for the whole term — even if market rates fall.
When a CD makes sense
- You have a lump sum you won't need until a known date (a down payment, tax bill, or tuition).
- You want to lock in today's rate because you expect rates to drop.
- You want a guaranteed, federally insured return with zero market risk.
The trade-off
Withdrawing early usually costs an early-withdrawal penalty (commonly 3–12 months of interest). If you might need the cash, a high-yield savings account or money market keeps it liquid.
CD laddering
Split your deposit across 1-, 2-, and 3-year CDs so one matures every year — you keep access to part of your money while still capturing longer-term rates. Estimate returns with the CD calculator, see how CD interest is calculated, and compare the best Kansas City CD rates today.