How to open, hold & cash out a CD

By Sabrina Karl

If you’ve never put money in a certificate of deposit before, you might wonder how much more involved it is than a savings account. The answer is that it’s easier in some ways, while a bit more hands-on in others.


The initial opening is not complicated. You’ll be asked to submit the same kind of information as you would for any other bank account. However, you’ll want to be a bit more vigilant before signing on the dotted line for a CD.


For one, be sure to carefully consider how much to deposit. Since you’ll incur a penalty for cashing out early, only invest a sum you feel confident you can keep on deposit for the CD’s full term.


Second, be sure to check the institution’s policy for early withdrawals, in case a change in situation requires you to access your money prematurely. Although paying a penalty isn’t ideal, it’s an acceptable risk if you avoid institutions with particularly onerous penalties.


Once opened, managing the CD through its term is very hands-off. You’ll receive regular statements, possibly just quarterly, documenting how much interest your certificate has earned that period. But no action will be required from you.


As the CD approaches maturity, however, you’ll want to watch for notification on how to instruct the bank on what to do with your funds at the term’s end. Though you’ll be offered to roll the funds into a new CD (and if you do not specify otherwise, this is usually the default), you’re almost always better off claiming your funds, whether it’s to shop around for the current best rate or to use the money another way.


Although CDs take a little more thought and planning up front, and careful management when they mature, the time in between is a low-maintenance affair.