Can You Add Money To A CD?

Certificates of deposit, or CDs, are attractive savings options because of the higher yields they earn. But what they offer in interest, they often lack in flexibility. You typically can’t add money to a CD after opening it and making your initial deposit—but add-on CDs offer an exception to that rule.

How Do CDs Work?

A CD is a type of deposit account that earns fixed interest on your balance over a specified period of time called the CD term. Generally, CDs have higher interest rates than savings accounts, but they don’t offer the same flexibility.

When you open a CD and make your initial deposit, you agree to leave that money alone until the end of the CD’s term. Terms can range from less than one month to ten years, with the most common CD terms ranging from three months to five years. Throughout the term, your deposit earns interest at a fixed rate. When the term ends, your CD matures, and you can withdraw the balance or roll that money into a new CD.

If you withdraw money from your CD before its term ends, you’ll usually have to pay an early withdrawal fee.

Can You Add Money to a CD?

Generally, you can’t add money to a CD after you’ve made your initial deposit—until it matures. At maturity, you’ll be given a grace period during which you can add or withdraw funds.

However, there is an exception: add-on CDs. Add-on CDs are a special type of CD that allows you to add money to your initial balance by making an additional deposit—or multiple deposits—during your CD’s term.

Add-on CDs aren’t as common as regular CDs, and not all banks and credit unions offer them. And the perk of being able to add money to your CD whenever you want comes at a price—add-on CDs often don’t have as many terms to choose from and may have lower interest rates than regular CDs.

Pros and Cons of Adding Money to a CD

Pros

• Gradual savings. You can bulk up your CD account as you save, rather than only investing what you can afford upfront.
• Fixed interest. Add-on CDs, like most CDs, guarantee fixed interest for the length of the CD term.
• Lower deposits. Add-on CDs may have lower minimum deposit requirements compared to regular CDs.

Cons

• Hard to find. Add-on CDs are hard to find, as fewer financial institutions offer them than regular CDs.
• Limited term options. Add-on CDs may have fewer term options than regular CDs, meaning you may not get access to the highest-yielding terms.
• Lower interest. With fewer terms and banks to choose from, you likely won’t find the highest interest rates offered by add-on CDs.
• Early withdrawal penalties. While you can make deposits into add-on CDs at almost any point, you usually can’t make early withdrawals without penalty.

How To Add Money to a CD Account

Typically, you can only add money to a CD account when you make your initial deposit or when it matures if you choose to renew your CD. Here’s how to add money to your CD at each stage.

• Initial funding: After you open a CD account—whether online or in person—you’ll need to fund it with your initial deposit. Some CDs have minimum deposit requirements you need to hit to earn the advertised interest rate. You can typically fund your account with an electronic transfer from another bank account.
• At maturity: When your CD matures, it enters what’s known as the grace period. Grace periods often last seven to 10 days but vary by account. During the grace period, you can withdraw funds, add funds, renew your account or close your account.

However, an add-on CD allows you to make additional deposits throughout your CD’s term. Some only allow one additional deposit while others allow multiple. The method of making additional deposits varies by account, but you can likely make deposits by electronic transfer. Check individual account details for specific instructions related to your CD.

Is Adding Money to a CD a Good Idea?

Adding money to a CD may be a good idea, but it depends on your situation. For example, you may want to add money to a CD if you come up with additional savings and want to capitalize on your existing CD’s high interest rate.

On the other hand, say interest rates rise during your CD’s term. Instead of adding money to your CD, it may be worth putting that extra cash in a new CD with a higher rate.

Of course, adding money to a CD is only a good idea when you’re comfortable leaving it alone for the remainder of the CD’s term. Otherwise, you’ll end up paying early withdrawal fees if you need to access it.

Alternatives to an Add-on CD

If an add-on CD isn’t the best fit for your needs, here are some alternatives:

• CD ladders. A CD ladder is a savings strategy that allows you to take advantage of the best CD rates while adding and withdrawing money—if you want to—at regular intervals. You achieve this by opening multiple CDs with staggered maturity dates. Then as each CD matures, you can add more money and renew the CD for the longest term length in your ladder.
• High-yield savings accounts. High-yield savings accounts may not always pay as much interest as CDs, but they still offer competitive yields. The real benefit, though, is the fact that you can access your savings whenever you need to—and you can make additional deposits. Just know that some financial institutions may enforce monthly withdrawal limits on savings accounts.
• Money market accounts. Money market accounts (MMAs) share a lot of the same benefits of high-yield savings accounts—competitive interest rates and flexibility included. MMAs tend to be even more accessible than savings accounts since they often come with checks and a debit card. The downside is that MMAs often have higher minimum balance requirements.

Frequently Asked Questions (FAQs)