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Yes, CDs are safe because they are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA), which means you can get your money back if the bank or credit union fails. Plus, your principal is not at risk with a CD, unlike with other investment options. At the end of the CD term, your initial deposit is returned to you – along with interest – despite any market fluctuations.

Ultimately, CDs are just as safe as other deposit accounts, like savings accounts, high-yield savings accounts, or money market accounts, which are all insured by the FDIC or NCUA and do not put your principal at risk.

Reasons Why CDs Are Safe

Government-Backed Insurance: Nearly all banks and credit unions carry government-backed insurance for deposit accounts. CDs offered by banks are typically insured by the Federal Deposit Insurance Corporation (FDIC), and credit union CDs are insured by the National Credit Union Administration (NCUA).

Principal Protection: When you invest in a CD, your initial investment, known as the principal, is protected. You will receive your principal back in full at the end of the CD term, regardless of any market fluctuations.

Fixed Interest Rates: CDs generally pay investors a fixed rate that does not change. Having a rate locked in offers predictability and safety. However, it is also important to note that a rise in inflation could eat into your returns.

Encryption and Multi-Factor Authentication: Major financial institutions offering online accounts use encryption technology to protect your username, password, and other personal information. Many companies also have multi-factor authentication, a two-step process that sends you a code via text or email to log in to your account.

You can compare the best CD rates here at WalletHub.

The different types of CDs include traditional CDs, callable CDs, jumbo CDs, no-penalty CDs, step-up CDs, and several other variations that have their own unique features and pay-out structures. By choosing CDs that align with your investment goals, you can create a tailor-made strategy to achieve your financial objectives.

Different Types of CDs

1. Traditional CDs.

   These are the standard and most common type of CDs. They have a predetermined term length, typically ranging...

A $10,000 certificate of deposit (CD) can make as much as $538 in a year right now, assuming a 5.38% APY and monthly compounded interest. Note, the highest one-year CD yields range between 5.0% and 5.5%, while the average is just under 2.0%.

1-Year CDs with the Highest APY