Does the amount of my CD deposit affect my rate?

By Sabrina Karl

If you’re getting ready to sock savings away in a certificate of deposit, you may know how much you want to deposit. But as you shop rates, you might discover deposit minimums and rate tiers influencing your decision.

Most CDs stipulate a minimum deposit. That’s the smallest amount you can invest to open a particular CD. Fortunately for modest savers, many certificates have entry points as low as $1,000 or $500. Others even lower the bar to no minimum at all.

But that’s not always the case. Sometimes depositing more funds will earn you a better rate, and it happens one of two ways.

Some certificates simply have hefty minimum thresholds, requiring a deposit of $5,000 or $10,000. And there are also “jumbo” CDs requiring $25,000 or even $50,000 in a single certificate. These larger CDs aren’t guaranteed to pay better than lower-minimum options, but often they do.

Then there are banks and credit unions that offer CD rate tiers. Here, for example, you may earn one rate on deposits up to $4,999, then a slightly higher rate above $5,000, and perhaps a third rate if you deposit $25,000 or more.

These options may lead you to stretch a bit on your deposit in order to score a higher rate, moving for instance from an initially planned $20,000 up to $25,000 to qualify for a well-paying jumbo certificate.

It may also impact whether you open one vs. multiple certificates. The strategy of splitting your savings into more than one CD — to lessen the penalty hit if you need to cash out some of your savings early, but not all of it — is a smart one. But if it prevents you from earning a higher rate with a single, larger certificate, you may want to reconsider.