What’s the Typical Minimum Balance for a Certificate of Deposit?

The financial institution issuing the certificate of deposit (CD) sets the product’s minimum deposit amount, which can range anywhere from no minimum to about $2,500. Some banks and credit unions will let you buy a CD with a small amount and then add to it for a short period (those are often called add-on CDs). Others require at least the minimum amount to be deposited in order to open the account.

Whether you’re about to start retirement or are already into it, CDs are a safe and stable investment option. With CDs, you earn regular interest payments and cannot lose your principal. However, you can’t access your money again until the CD reaches maturity. If you withdraw from your CD early, you could pay a penalty, lose some or all your interest, or both.

Interest rates, term lengths and penalties for early withdrawal are decided by the issuing institution. Check maturity dates and don’t lock up any money you might need soon.

The annual percentage yield (APY) is the interest rate your CD earns during its term. Some financial institutions offer higher APYs for larger deposits and some for longer terms. Many banks and credit unions use both methods. These tiered rates offer incrementally higher APYs as the amount and the term length of your CD increase.

Financial institutions can have significantly different CD offerings. Shop around for the best rates and terms. Besides the minimum balance requirements, also consider any fees you might incur.

Term lengths are another key consideration. Shorter terms usually offer lower APYs, and longer terms get higher rates. But a high APY does you no good if you have to withdraw from your principal early. Search for a CD that best suits your time limit and APY needs.

CD accounts can have a maximum amount ceiling. As with minimums, the actual maximum amount depends on the issuing financial institution. Chase, for instance, will allow you to open a CD account with up to $1 million and may consider even higher deposits under supervised circumstances. Marcus by Goldman Sachs, on the other hand, permits account holders only a total of $250,000 across all their savings, including CDs.

Depending on the bank, type and length of CD you choose, your interest rate could depend on the amount you deposit. Higher deposits sometimes result in higher interest rates. This is why it’s so important to research the specifics of the CD account you choose.

The Federal Deposit Insurance Commission (FDIC) insures your deposit at a registered financial institution for up to $250,000, including CD accounts. If you have more than $250,000 at a single bank and that bank fails, you might not be able to recoup more than the guaranteed amount.

Browsing CD offerings at different financial institutions is the best first step to finding the right CD for your retirement portfolio. Banks and credit unions often run promotions, limited-time offers on CDs with higher APYs for specific terms, usually a little longer than normal. These promotions may only be available online or in person, so it pays to shop around.

In addition to choosing CDs with higher APYs and longer terms, consider different CD products. Variable-rate CDs maintain term limits and penalties but offer fluctuating interest rates. Jumbo CDs are often available for larger amounts, usually starting at $95,000.

There are also smart investment strategies that can help you boost your interest rates. Laddering — staggering the purchase or the terms of multiple CDs — allows you to take advantage of the higher APYs offered by longer terms without locking in all your funds for the full period.

For instance, if you had $50,000 to invest, you could put it all in one five-year CD with a single APY. Or you could buy five $10,000 CDs, for one-, two-, three-, four- and five-year terms. This laddered approach gives you interest rate flexibility and increased access to your principal.

CDs are a safe way to earn interest from available cash while preserving the principal investment. CDs offer fixed interest rates with defined time periods, and they’re an investment option with little to no risk. While having all your retirement savings in CDs exposes you to inflation, including CDs as part of your overall financial plan is a smart way to diversify your retirement portfolio.

Researching the minimum balance requirements for CDs at various banks means you can choose how much money you want to put away and for how long. You don’t necessarily want your savings to be tied up for decades. Instead, you’ll want to maintain your capital while assuring yourself a fair and regular rate of return.

CDs aren’t the right investment product for everyone. If you like the security, fixed income or low-risk exposure that CDs offer, other alternatives might be more suitable for your personal circumstances.