How Many CDs Can I Have?

The simple answer to "How many CDs can I have?" is "As many as you need." Technically, no federal banking regulations restrict the number of CDs a person can have. While there's no limit on the number of CDs you can open, whether it makes sense to open many CDs can depend on your financial goals and needs.

Certificate of Deposit (CD) Basics

A certificate of deposit (CD) account is a special savings account. Also referred to as a time deposit account, CDs allow you to save money for a set maturity term. Depending on the CD, this maturity term may be as short as 30 days or as long as 10 years.

The money needed to open a CD can depend on the bank or credit union's minimum deposit requirements. For instance, the bank could require anywhere between $0 to $1,000 to open a single CD account. With a jumbo CD, the minimum deposit may be $5,000, $10,000, or more.

While your money is in the CD, it earns interest according to the rate set by the bank or credit union. CD interest rates can vary based on the maturity term and the type of CD.

The money you deposit in a CD is intended to remain there until the CD matures. When your CD matures, you can withdraw all the money or roll the CD over into a new CD.

Your bank may charge an early withdrawal penalty if you take money from a CD before its maturity date. Banks can assess a flat fee or penalize you by deducting some or all of the interest earned. The CD term typically determines the amount of the penalty.

How Many CDs Can I Have?

You can open multiple CDs at the same bank or different banks.Opening more than one CD could make sense in a variety of situations.

Multiple CDs for Savings Goals

If your goals have different timelines, multiple CDs could accommodate due to different maturity terms. This allows flexibility in saving money for short- and long-term goals. So you might open:

• A CD with a 12-month term that comes due in December for the holidays.
• Another with an 18-month term for a vacation the following July.
• A third with a 24-month term to help with upcoming wedding costs.

For a retirement savings goal, you could open an additional IRA CD for retirement and benefit from various tax advantages.

Multiple CDs for a CD Ladder

A CD ladder consists of multiple CD accounts with varying maturity dates and interest rates that mature and roll over into new dates. As a CD matures, you'll likely roll it into another CD. Laddering CDs can help you avoid early withdrawal penalties if a CD's maturity date is always just around the corner.

Use Multiple CDs to Manage Interest Rates

Multiple CDs can help you capitalize on interest rate changes if you believe CD rates will change over time. You might put some cash into a higher-rate 6-month CD and the remainder into a 24-month bump-up CD that allows you to take advantage of CD rate increases over time.

Even if you have money in a CD at one bank, you might spot a CD with a higher rate elsewhere. If you have the cash to spare, you might open a second CD at the other institution versus breaking the first CD.

Use Multiple CDs for Your Significant Savings

If you have a large lump sum of cash you don't feel comfortable investing elsewhere, multiple CDs could offer a low-volatility, low-risk alternative. Breaking the funds up and putting money into numerous CDs at different banks can help you insure your CDs beyond the $250,000 limit available at just one bank. But always speak with a bank representative before opening a CD to confirm the bank is FDIC-insured.

FDIC Coverage and Multiple CDs

As noted, CD accounts are insured when held at a member bank. When opening more than one CD, keeping FDIC and NCUA limits in mind is essential. Holding too much money in CDs and other deposit accounts at the same bank could push you over the FDIC limits, potentially leaving some of your funds unprotected.

For example, say you have a checking account, savings account, and two CDs at the same bank. The total amount in those four accounts is $240,000, and you own them all yourself, with no joint owners. In that scenario, all your savings would be within the FDIC limits.

Now, assume your total savings balance across the accounts is $280,000. In that case, $250,000 of your savings would be protected, but $30,000 would not. However, you could make sure that all those funds are protected by moving some of your savings to another bank's CD.

The Bottom Line

CD accounts can be a good way to securely save money that you don't plan to spend in the near term. If you'd like to have more than one CD for savings, it's important to do your research before opening multiple accounts. Specifically, compare the best CD rates to see which banks or credit unions have the most competitive offers. Also, pay attention to maturity terms and fees to choose CDs that are the best fit for your needs.