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CDs Safe or Not? How FDIC Insurance Impacts Your Investment Security

Lauren Brown Updated: September 18, 2023 • 4 min read
Certificate of deposit

Are you looking for a safe investment and considering Certificates of Deposits (CDs)? These time-bound deposits made with a bank or other financial institution are popular as they offer a higher return than your regular savings accounts. As you consider CDs for your portfolio, it is helpful to understand how FDIC insurance for CDs works in order to maximize your coverage.

CDs at FDIC-insured institutions have maximum insurance coverage. 

Are CDs FDIC Insured?

One of the questions you may have is, “Are CDs FDIC insured,” and the answer, in short, is yes. The FDIC is an independent agency created by the American government to maintain stability and public confidence in the nation's financial system. It insures various deposit accounts — checking, savings, money market accounts, and of course, CDs. When you deposit money into a CD at an FDIC-insured institution, your investment has insurance coverage to the maximum limit. 

As of August 2023, the insurance limit is $250,000 per depositor, per FDIC-insured bank, for each account ownership category. If you have a CD worth $250,000 or less, your money is fully insured even if the bank fails. If your deposit is larger, you might want to consider separating the amount and investing in different banks or account ownership categories. This will ensure you have full deposit insurance coverage.

For example, investing $600,000 in a CD with an FDIC-insured amount can be maximized by splitting it into three installments. Thereafter, each can be transferred to a distinct institution or account with a distinct name, such as a joint account or trust account. Part of the money could be placed in CDs in IRAs, which are individually insured.

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The Safety of CDs

Are CDs safe, though? Yes, they are, thanks to FDIC insurance for CDs. If your bank or financial institution fails, the coverage means you will not lose money on your investment. FDIC coverage for each bank is up to a maximum of $250,000 per depositor. Though bank failures in the United States are not common, they do occur and have happened as recently as this year.

So, what happens if a covered bank does collapse? In this event, the FDIC protects the depositors. It does so by arranging a sale to another institution, and the deposits are available in a new account shortly after that. This is what happened recently when JPMorgan Chase purchased First Republic Bank. If a deal is not possible, the FDIC usually sends a check for the insured balance of your accounts.

FDIC insurance for CDs safeguards the holder from any potential bank collapse up to a limit of $250,000 per depositor. While the investment comes with other risks, you can rest assured that your CD FDIC-insured amount is safe from bank instability.

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Pros and Cons of Using CDs

Like any financial product, CDs come with a unique set of advantages and potential downsides. Before you make a deposit, it might be helpful to understand the details of a CD

Pros of CDs:

  • FDIC insurance for CDs: FDIC-insured banks have coverage up to $250,000 per depositor for each account ownership category. This adds a layer of security to your CD investment.
  • Higher interest rates: CDs usually offer higher interest rates than traditional savings accounts. The investment product also tells you the return before you purchase it, meaning there are no surprises on the maturity date.
  • Variety of terms: CDs offer flexible term lengths from a few months to several years, allowing you to choose an investment period that aligns with your financial goals.

Cons of CDs:

  • Lack of liquidity: When you put your money in a CD, you commit to leaving it there for a specified period. As you cannot change the investment quickly into cash, the investment is said to have less liquidity. Typically, CDs are less liquid than other forms of saving, such as money market funds or traditional savings accounts. 
  • Penalty for early withdrawal: You will likely be subject to financial penalties if you require the money from your CD before its maturity date.
  • Inflation risk: Your real, inflation-adjusted return could be less than expected if inflation rates rise significantly during the term of your CD. A higher inflation rate can cause your purchasing power to dwindle over time. 
  • Interest rate risk: If interest rates rise after you have locked into a CD, you might miss out on earning more on your deposit.

Using CDs for Emergency Funds

Building an emergency fund is important, but can you use CDs for these savings? You may earn a greater return and have FDIC insurance for CDs, though it is necessary to consider the potential limitations. 

One of the main requirements for an emergency fund is easy access, otherwise known as liquidity. By design, CDs limit liquidity through a fixed term. Though it is possible to use CDs for your emergency fund, it might not be the most convenient option, especially if you need the money quickly.

If you still prefer to include CDs in your emergency fund, consider doing so with only a portion of the fund, keeping some cash for any potential crisis. You can also consider a CD ladder where you hold multiple CDs with different maturity dates. This strategy allows you to benefit from the higher interest rates of longer-term CDs while gaining regular access to a portion of your money as each CD matures. Creating a CD ladder requires careful planning, so consider speaking with a financial advisor for further guidance. 


CDs are a secure investment option offering higher returns than traditional accounts. FDIC insurance protects these assets up to $250,000 per depositor, guaranteeing your money in case the bank or financial institution collapses. Like all financial tools, CDs have pros and cons, including liquidity constraints and potential inflation risk. By considering each characteristic before investing, you can better determine if the asset is right for you. 



What is the FDIC insurance limit for CDs?

As of August 2023, FDIC insurance for CDs covers deposits up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category.

Are CDs with an online bank FDIC-insured?

The answer to “Are bank CDs FDIC insured?” is similar for online banks. If the online bank is FDIC insured, the coverage also applies to your CDs. Your CD does not have insurance if the online bank does not have FDIC coverage, though. You can confirm your bank’s status using the BankFind tool on the FDIC’s website.

Does the FDIC protect my CD from identity theft or fraud?

FDIC insurance for CDs protects against bank failure but does not cover individual fraud or identity theft incidents. 

Are CDs safe if the market crashes?

During a market crash, the value of your CD will remain stable. CDs have a fixed interest rate, so you do not need to wonder, “Are CDs safe” concerning the market as they do not fluctuate with it.

What are 3 things not insured by FDIC?

The FDIC does not insure the following: - Loss resulting from theft or fraud - Foreign deposits and brokered CDs - Investments such as mutual funds, annuities, life insurance policies, stocks, or bonds

Written by Lauren Brown linkedin-icon

Lauren has over a decade of experience in wealth management and financial planning. She is a CFA charterholder and holds a Bachelor's degree in Finance. Lauren has worked with several asset management firms, offering wealth advisory and portfolio management services to high-net-worth clients.