Get to Know CDs ... The Financial Kind!

Originally published 2023 | Updated Oct. 2026

I find a lot of truth in the saying, “Everything old is new again.” Isn’t it interesting how things can become outdated, and then after some time get a new lease on life? I recently went shopping with my daughter and had to smile at the outfits she was excitedly pointing out as so fashionable. I was thinking, “I’ve owned that combination before. I remember that style. That was cool when I was a teen.”

Then my son came home from helping a neighbor clean their garage and was excited to have been rewarded with a box of old records.

Thinking about these things that were great in their day and are becoming valuable again got me thinking about CDs. No, not compact disc CDs (although they might eventually make a comeback, too!), but CD as in certificate of deposit.

This financial savings tool may be less familiar to those who began saving when interest rates were low. Higher rates can bring renewed interest in certificates of deposit (CDs), but they’re worth getting to know in any rate environment. Learning how they work can help you decide whether they’re a helpful tool for you to both save and earn.

Quick Safety Checklist: Thinking about opening a CD? Review the account terms, select a term length that matches when you will need your money, and keep your emergency funds in an accessible savings account.

1. Get to Know How CDs Work

A certificate of deposit is a time deposit account. You pledge to keep a set amount of money in the account for a set period of time. In exchange for putting those funds in the bank, the bank pays interest, often at a higher rate than a traditional savings account, depending on current offerings.

Traditional CDs are a set-it-and-forget-it type of account. How easy is that? Once you have opened it and funded it, you generally cannot add to it during the term. If you need to withdraw your deposit before the maturity date, an early withdrawal penalty may apply. Review the account terms before opening a CD so you know what to expect.

When considering setting up a CD, there are two key pieces to think about: the term and the rate.

2. Get to Know CD Terms

The length of a CD is known as a term, and financial institutions have a number of terms they offer, ranging from one month to multiple years. You can see Bank of Utah’s available CD terms and rates.

Consider your savings goals before deciding on a timeframe:

• What are you saving for? Define your specific short-term or long-term financial goal.
• How much will you need? Determine the total amount required to reach your milestone.
• How quickly will you need access to your funds? Choose a term that ends before you expect to need the money.

Defining these will help you consider what term will make the most sense for you. Choose a term that ends before you expect to need the money, and keep funds for everyday expenses and emergencies readily accessible.

Keep in mind that rates are different for each term, so once you know a ballpark for your goals, you’ll want to look at rates to finalize the term that’s best for you.

3. Get to Know CD Interest

There are two rates to know when it comes to CDs: the interest rate and annual percentage yield (APY). Interest paid on a CD will compound. That means the interest is added to your principal periodically, over the length of your CD. Then that new total earns interest. So, over time, you’ll get paid for all of the money in the account, not just the money you invest. Even the interest earns interest!

The interest rate is the rate used to calculate interest on your deposited funds. The APY expresses what you could earn over a year, taking compounding into account and assuming interest remains on deposit. Because APY is an annual figure, it does not represent your total earnings for every CD term. For example, a six-month CD earns interest for six months, not a full year.

Financial institutions may also offer specials on certain CD terms. These vary by institution, so keep watch for them and consider whether the term fits when you’ll need your savings. You can explore Bank of Utah’s current CD options and rates.

4. Get to Know Why CDs Are Great

CDs are great because a traditional fixed-rate CD offers a predictable interest rate that stays locked in through maturity, even if rates offered on new CDs change. Keeping your deposit and interest in the account until maturity allows you to earn according to the account’s terms without an early withdrawal penalty.

CDs also provide a great way to manage your savings goals. If you are saving for something in the future, and you already have a good chunk of money saved for it, putting that in a CD can help reduce the temptation to use those funds elsewhere. We’ve all had the experience of saving for a goal, but then something else comes up, and our goal savings decreases. A CD can help keep money dedicated to that goal while earning interest, provided you choose a term that fits when you’ll need it.

5. Get to Know Your CD Options at Bank of Utah

Pulling out an old CD can remind you why you loved an album in the first place. Taking another look at the financial kind might remind you what they have to offer, too. Bank of Utah offers a variety of terms, online opening for eligible CDs and in-person opening at a branch, with bankers available to answer your questions. Explore current CD options and rates to see what fits your savings goals.