Certificate of deposit account 101: How can it help me?

Caricature person climbing up on a ladder in the clouds.
« Return to Learn

When you think about your savings, what do you envision? People often imagine their savings as a large pool of money sitting in a single account. But savvy savers know better. Even if you might not consider yourself a savvy saver – we’re here to help you become one. 

In truth, effective saving is all about dividing your funds into smaller pools and placing them in different accounts that can help maximize their growth. Financial institutions offer a variety of different savings and investment options, allowing you to tailor your savings strategy to your specific needs, goals and situation. 

A certificate of deposit (CD) is a frequently overlooked money tool that can help you power up your savings and take full advantage of your interest-earning potential. If you’re new to saving, it might not be the first place to start — but once your savings account is humming along and you’ve got an emergency fund set aside, it might be time to consider diverting some of your cash into a CD to help fund your future. 

How certificate of deposit accounts work 

A CD is a type of savings account that locks up your money for a set amount of time. While your funds are inaccessible, they’ll also be earning a higher interest rate.* Once the CD term ends, your money is unlocked and you can decide what to do with it next. 

You can open a CD with as little as $500, and the terms typically range from six months to five years. The longer the term, the more interest you’ll earn — and the longer your money will remain tied up.  

CDs are especially useful when you have a clearly defined goal you want to accomplish within a specific time frame. Think about it as setting the guardrails to make achieving your goal with ease. You’ll know from the beginning exactly how much interest you’ll earn, what the final balance will be and when it will become available, so you can plan ahead and effortlessly hit your target. 

Since you get to choose the term length and how much you deposit, you can use CDs for a variety of savings goals. For example, you can: 

  • Open a six-month or 12-month CD to save up for a vacation, home renovation or large purchase. 

  • Use a five-year CD to save up for major life event down the road, such as a wedding or a college fund for the kids.  

  • Redirect extra funds from your savings into a CD with any term length to keep your money growing at max capacity. 

Member tip: There are many ways to put your money to work! A CD is versatile and can get used in a variety of ways to empower you to save. 

How to get the most from your CD 

Think of CDs as intermediate-level savings tool. First you launch your savings account and build up an emergency fund. Then set that aside and let your money pool up some more. Once you have an extra $500 sitting around, it might be time to consider opening a CD. 

Here are a few considerations to keep in mind before you get started: 

  • Decide how much of your savings you can live without, and for how long. Make sure you have a healthy emergency fund and enough money on hand to cover any expenses that might come up during the term of the CD. 

  • Start small. Put $500 into a six-month CD and see how it goes. Once you’ve gotten the hang of it, you’ll be able to save with greater confidence. 

  • As your savings continue to grow, consider using CD laddering to take advantage of higher interest rates. For example, you might deposit $5,000 into five different CDs that mature at different times. As each one matures, reinvest it in a five-year CD. 

How to open a CD account 

Opening a CD is all about giving up access to your money today to help fund your future. It’s a decision in the short term to make a positive impact for future you. At OCCU, all of our certificate accounts are designed with your future in mind. We offer competitive rates and a variety of terms so you can customize your savings plan to meet your individual needs. 

Getting started is easy. You can open a CD with us online using your OCCU member account and start earning higher interest. Discover our latest special certificate rates here and get started with funding your future today.