There's no limit to the number of certificates of deposit (CDs) you can open, but holding more than one should depend on your financial goals. Rates on CDs are currently 5.00% or better—we actually count over 30 CDs with rates of 5.25% or better in our daily rankings—so you can open various CDs with different terms to maximize your returns and earnings.
Key Takeaways
- There are no rules for how many certificates of deposits you can open. There are currently over 30 top CDs with rates of 5.25% or better.
- Investing in multiple CDs should depend on your financial goals.
- Investing in CDs of varying maturities or building a CD ladder can help capture high rates and avoid early withdrawal penalties.
- Limitations of holding multiple CDs include locking up money and not being able to reinvest at the same rates if the interest rate environment changes.
How Many CDs Can You Own?
There are no regulations that restrict the number of CDs you can hold. The question then becomes, how many do you need? That will depend on your financial goals. Owning multiple CDs might be a good idea if you are trying to lock in the best savings rates possible in uncertain times.
When Opening Multiple CDs Makes Sense
The Federal Reserve (Fed) has been raising rates to combat high inflation. The Fed has hiked the target for its fed funds rate from near zero to more than 5.00% in little over a year. CD rates take direction from the Fed rate, and have soared on account of the rate hikes, making a compelling case for investing in CDs. Our daily rankings of the best CDs show there are several with top rates of 5.00% or more.
In its most recent meeting, the Fed hit a pause on rate hikes, though not ruling out more hikes for the year. Even so, it doesn't expect to cut rates anytime before next year. That could mean the high is in for this rate cycle and the APYs on CD investments may not rise too far from the current levels.
Owning multiple CDs could be worthwhile in the following circ*mstances:
- You are saving for different things that you will pay for at different times
- You want to build a CD ladder to capture the high interest rates across different CDs with different terms
- You have a CD right now, but its rate is not as high the current rates offered on CDs
CDs have different maturity terms, allowing for flexibility with your savings plans. You could open a CD with a 12-month term, and one with an 18-month term, depending on the target date for a financial goal or further investment.
A CD ladder involves multiple accounts with different maturity dates and interest rates. The laddering of CDs can help to avoid withdrawal penalties by investing in a number of smaller CDs with different maturity dates. It is also a method for locking in savings at the current rate and having room to add a further CD if interest rates were to rise further after a Fed meeting.
The other benefit of using a CD is that they are treated like other bank deposits and are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). Investors with multiple CDs can hold them at different financial institutions and all will be secure, as long as the provider is a member of the FDIC or NCUA (for credit unions). If you invest in multiple brokered CDs, you might even be able to stretch your $250,000 deposit insurance limit.
When Opening Multiple CDs Doesn't Make Sense
If you have $10,000, you could put it all into one CD or you could put it into two CDs each with $5,000. But if you don't have any more money than that to deposit, you may want to decide if opening multiple CDs is the right move. You should also ensure that you have other liquid savings in a high-yield savings account or a money market account. Investing all of your money into CDs could mean early withdrawal penalties if you need to take out that cash for surprise expenses.
What CD Maturity Should You Choose?
The maturity of the CD that you choose should be determined by your investment goals. However, John Corron of Monument Wealth notes that there is some re-investment risk to consider.
"The highest yields are in the 6-12 month maturity range," he said. "When CDs mature there is no guarantee that they can be invested at similar rates of return".
This would affect the allocation that you should make to a CD and should be discussed with your financial advisor if you are considering creating a CD ladder.
Rate Collection Methodology Disclosure
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide, and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (FDICfor banks,NCUAfor credit unions), and the CD's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates,read our full methodology.
