A certificate of deposit (CD) is a savings product where you agree to leave money with a bank for a set time. In return, you get a stated annual percentage yield (APY). It suits money you will not need before the end date.
If your plans might change, a high-yield savings account is often the better fit, even if the rate is a little lower.
Work out the cost of leaving early
A $20,000 one-year CD at 4.50% APY earns roughly $900 before tax if you hold it to the end. If you withdraw early and the penalty is 90 days of interest, a large part of that return can disappear.
Before you apply, turn the penalty into a dollar amount on your own balance. If you cannot explain that cost simply, wait.
Read past the headline APY
Some offers only pay the top rate on part of your balance, or only for a short introductory period. Work out what you would earn on the money you actually have.
Compare CDs with other CDs of a similar term. Do not compare a locked CD directly with an everyday savings account unless you have already decided you can lock the money away.
Check deposit insurance
At banks, eligible deposits are usually covered by the FDIC. At credit unions, look for NCUA cover. The figure people often quote is $250,000 per depositor, per insured bank, for each ownership category. If you use an app or broker, find out which bank actually holds your money.
Once cover is clear, choose a term that matches your date, then compare rates.