November 11, 2020

Can You Add Money to a CD?

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Generally, you cannot add more money to a CD once it is opened. However, there are two things you can do if you want to deposit more funds. Read on.

You see a great interest rate on a CD. You don't want to miss out on the rate, so you open the CD with whatever money you have now.

A few months later, you have more savings and would like to add it to your CD. Are you allowed to?

Usually, a CD does not allow you to add funds once it's opened. But there are special add-on CDs that let you make additional deposits during the term. If that's not available to you, there are other strategies to maximize your returns.

How Certificates of Deposit Work

CDs (certificates of deposit) are a type of savings product. They require you to deposit a fixed amount of money for a fixed amount of time. You get a fixed interest rate for the entire duration of the term.

This gives you guaranteed interest earnings over the whole term. Another benefit is that even if there's a federal interest rate cut, your CD rate stays the same. This makes CDs an attractive, secure option for short-term savings.

Typically, the longer the term, the higher interest rates. So you may be tempted to open a 5-year CD to get better rates. But not being able to add money to it could make it a turn-off.

If you're looking for flexibility to add more funds, you have a couple of options.

Whatever CD term you choose, you must keep your funds there until maturity. If you want to take your money out sooner, you'll face steep penalties (usually a few months' worth of interest).

1. Add-On CDs

Add-on CDs are a special type of CD that allows you to add additional funds during the term. The conditions will vary by bank. For example, some may only allow you to add more funds once, while some may allow for unlimited additional deposits. But these are pretty rare; very few banks offer add-on CDs.

Just like a traditional CD, your interest rate will be locked-in for the entire term. Any additional deposits will earn the rate offered when you first opened the account.

And keep in mind that while you can add more funds, you cannot withdraw until the CD matures.

Banks with add-on CDs include:
  • Associated Bank 12-Month Add-on CD ($100 minimum)
  • Bank5 Connect 24-Month Investment CD ($500 minimum)
  • First Horizon Bank Add-on CD ($500 minimum)
  • BMO Harris 1-Yr Add-on CD ($1,000 minimum)

While an add-on CD sounds like a great idea, make sure you're getting the best interest rate. If the interest rate is really low, it may not be worth it. In that case, it's probably best to just look for a regular CD with a higher rate.

This brings us to the second option.

2. Create a CD Ladder

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Alternatively, just simply open a new CD account whenever you have additional money to deposit. There's no limit to how many CDs you can open. You can even shop around at different banks to see which one is offering the best rates currently.

One smart strategy is called a CD ladder. This means splitting up your investments into different CDs with different maturity dates.

To illustrate, here's what your ladder strategy may look like:
  • Start with $1,000 in a 1-year CD
  • 3 months later, open a new 1-year CD with $500
  • 3 months later, open a new 1-year CD with $500
  • And so on…

With this strategy, you can regularly add money into your CD plan. Of course, you have total control over the amount, term, and interval.

This also ensures that you'll always have a CD that will mature soon. This way, not all your funds are tied up for such a long time. The "ladder" will provide you with a consistent cash flow. As each CD matures, you can withdraw the money if you need it, or reinvest into a new CD.

As a bonus, if interest rates happen to increase, you can open a new CD with a higher rate. However, it can go the other way too. If interest rates decrease, your new account will have a lower rate.

Would you use a CD?

Member FDIC

CD Rates - Up to 1.11% APY

  • $500 minimum opening deposit
  • FDIC insured
TermCD Rates
6 Months0.45% APY
1 Year0.50% APY
2 Years0.75% APY
3 Years1.00% APY
5 Years1.11% APY

3. Use a High-Yield Savings Account

Of course, you can always just keep your savings in a high-yield savings account instead of a CD, and exercise some control in not touching them. A savings account allows you to add to it whenever you want with no limit. But you are limited to 6 withdrawals per month.

Online banks will offer better interest rates than traditional banks. A lot banks offer competitive rates on-par with (or even higher than) CD rates. However, the interest rate can change at any time depending on the economy. So your rate can decrease suddenly.

Savings accounts and CDs are all FDIC insured. Your deposits are included in the $250,000 coverage limit for each depositor at each bank.

Discover Bank
Member FDIC

Discover Online Savings - $200 Cash Bonus

To get your $150 or $200 Bonus: What to do: Apply for your first Discover Online Savings Account, online or by phone. Enter Offer Code CY21 when applying. Deposit into your account a total of at least $15,000 to earn a $150 Bonus or deposit a total of at least $25,000 to earn a $200 Bonus. Deposit must be posted to account within 30 days of account open date. Maximum bonus eligibility is $200.

What to know: Offer not valid for existing or prior Discover savings customers or existing or prior customers with savings accounts that are co-branded, or affinity accounts provided by Discover. Eligibility is based on primary account owner. Account must be open when bonus is credited. Bonus will be credited to the account within 30 days of the account qualifying for the bonus. Bonus is interest and subject to reporting on Form 1099-INT. Offer ends 12/15/21, 11:59 PM ET. Offer may be modified or withdrawn without notice. See advertiser website for full details.

Expires 12/15/2021

Bottom Line

CDs require some commitment. You have to deposit a fixed amount of money and usually cannot add to it. If you want some flexibility, the best option is to create a CD ladder, which will allow you to add more funds, as well as have regular withdrawals.

Keep in mind that CDs are meant for storing savings that you won't need immediately. Make sure you have a separate emergency fund in a regular savings account that you can access at any time.

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