Follow this checklist before locking into a CD

Although certificates of deposit are among the safest saving vehicles, not all are created equally. Indeed, since their very nature requires committing funds to sit untouched for an extended period, you’ll want to choose wisely before signing on the dotted line.

The first criteria you’ll want to consider is the interest rate. How much institutions pay varies widely in general, and additionally, many banks and credit unions offer limited-time promotional CDs. So anytime you’re in the market for a new CD, it’s worth searching the current top rates for your chosen term to create a short list of candidates.

The next checkbox is determining whether each institution is federally insured, by the FDIC (for banks) or the NCUA (for credit unions). Although you may feel comfortable opening a certificate with a privately insured institution, most savers opt to stick to accounts insured by the U.S. government.

With your list whittled to top-rate CDs from federally insured institutions, it’s time to check early withdrawal penalties. The amount the bank or credit union will charge if you cash out early ranges from completely reasonable to downright exorbitant. Avoid any CD where the penalty could eat into your principal, and then check which certificates will hit you with the lowest fee should you withdraw the money early.

These three criteria should lead you to a few great CDs. But if you’re still torn between otherwise-equal certificates, you can check their compounding periods (the more frequent the compounding, the more you’ll earn), or how customer-friendly their website is. Calling to ask questions can also give you a sense of their customer service.

The world of CD options is immense, but following the first three steps of this checklist will lead you a certificate that pays well while exposing you to very little risk.