Are CDs FDIC insured?

Young woman on a bus, wondering if CDs are insured buy the FDIC.Image: Young woman on a bus, wondering if CDs are insured buy the FDIC.

In a Nutshell

A certificate of deposit, or CD, is a type of savings account that pays you interest for locking funds in for a specific time. CDs at most banks and credit unions are usually insured up to $250,000.
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Certificates of deposit are a type of savings account that require you to keep funds stashed away for a certain period of time.

Like other deposit accounts, CD accounts opened at federally insured banks and credit unions are usually insured up to $250,000.

When you buy a CD, you can deposit money for a set period of time — generally from six months to five years. In return for keeping your money in the CD, the financial institution pays you a guaranteed interest rate that’s usually higher than you would earn in a savings or money market account.

Some people create CD ladders, buying several CDs that mature at varying times. Ladders can supply a steady flow of income to withdraw or reinvest as the CDs mature.

Are CDs FDIC insured?

Like other savings accounts, most CDs purchased at banks are insured by the Federal Deposit Insurance Corporation, or FDIC. CDs bought at federal credit unions are backed by the National Credit Union Association, or NCUA.

You can use the FDIC’s BankFind tool to look for institutions that are covered. Federally insured financial institutions protect your money (up to a certain amount) if your bank fails and doesn’t have the funds to repay you.

How FDIC insurance works

The FDIC and NCUA are backed by the U.S. government to repay bank customers who lose money in the unlikely event of bank failure. If your bank or credit union fails, you will either receive a new account at another insured financial institution equal to the insured balance of your account or a check for the insured balance.

The FDIC and NCUA usually pay insurance within a few days after a financial institution fails.

To see if your CDs are fully federally insured, visit the FDIC’s Electronic Deposit Insurance Estimator or the NCUA Insurance Estimator.

What you should know about FDIC-insured CDs

  • Limits on insurance coverage CD accounts are insured for up to $250,000, for each covered account. Keep in mind that if you have money in a savings or checking account at the same financial institution, that will count toward your $250,000 limit. You can protect additional funds beyond the coverage limit by opening accounts at other financial institutions or by creating separate accounts at a single FDIC-insured bank.
  • Jointly owned CDs can be covered up to $500,000 Co-owned accounts are insured for an additional $250,000.
  • You don’t have to apply for federal insurance FDIC and NCUA coverage are automatically applied whenever a deposit account is opened.

What kinds of CDs aren’t (always) federally insured?

  • Market-linked CDs Market or equity-linked CDs have rates of return that are usually tied to the performance of a stock market index. Equity-linked CDs generally are insured by the FDIC, but there may be limits to what and how much is protected. Check the CD issuer’s disclosure to find out whether your money is insured.
  • Jumbo CDs Jumbo CDs are like other CDs, but they usually have higher minimum opening deposit requirements — generally $100,000. The FDIC and NCUA cap coverage at $250,000.
  • Yankee CDs Yankee CDs are issued by U.S. branches of foreign banks and are not insured by the FDIC.
  • Brokered CDs Brokered CDs are offered by brokerage firms or investment professionals and may have slightly different terms — like longer holding periods and fees — than a traditional CD you get from a bank. Unless the brokerage or stockbroker is partnered with an FDIC-insured bank and the CD is a bank product, the brokered CD isn’t federally insured.

What’s next?

CDs can be a useful part of your investment portfolio because the funds are usually secure and returns are predictable, as long as you keep your money invested until the CD matures.

CDs may be a good option if you already have an emergency fund and can set aside money you don’t need immediate access to. If you think a CD is right for you, consider shopping for a CD with the highest annual percentage yield at financial institutions backed by the FDIC or NCUA. You may also want to look into other federally insured financial products, like savings accounts, money market accounts or even interest-bearing checking accounts, which might provide more flexibility, higher rates and perks like rewards or sign-up bonuses.

About the author: Sarah Sidlow is a freelance writer and editor based near Detroit. She has a master’s degree in journalism from Georgetown University. Sarah’s work has appeared in Luxembourg’s national newspaper, Washington City Paper… Read more.