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Fund the CD Finally, you'll need to fund the CD. You'll only do this once. Unlike savings accounts, CDs generally don't allow you to make additional deposits. You can fund your CD with an online or phone transfer from another account or by mailing a check.

Traditional CDs require you to leave your deposit in the account for a set period of time, known as a term. In return, you earn interest, which you'll receive when your CD reaches maturity. If you withdraw your money before your CD matures, you'll typically have to pay an early withdrawal penalty.

One major drawback of a CD is that account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals, which can eat up interest and can even result in the loss of principal.

On average, a 12-month CD pays the highest interest rate of any CD term as of July 17, 2023, with an average annual yield of 1.72%, ing to the FDIC. A five-year CD pays an average of 1.37%. Based on these averages, a $10,000, 12-month CD would earn $172.

A 1-year CD with a rate of 5.35% may be a good option. If you invested $5,000 in the top paying 1-year CD today, you'd earn $267.50 in interest at the end of the term. And a 22-month CD?part of our 2-year term category?could net you close to $500 in interest by the end of the term.

Federal law sets a minimum penalty on early withdrawals from CDs, but there is no maximum penalty. If you withdraw money within the first six days after deposit, the penalty is at least seven days' simple interest.

The idea is to stagger them so they provide a stream of interest payments as each one expires. You'll also get back your initial deposit at the end of each term. You can reinvest that money into another CD or use it to fund short-term financial goals like: Buying a home.