Yes, there are limits on CDs, but not in the way most people expect. There’s no federal cap on how large a certificate of deposit can be, and you can open as many as you want. The real limits are three: federal deposit insurance protects only $250,000 per depositor, per bank, per ownership category; each bank sets its own minimum to open and, sometimes, a maximum it will accept from one customer; and once your money is in, early withdrawal penalties restrict when you can get it out without a cost.
The $250,000 Insurance Cap
The most important limit on any CD is the federal deposit insurance ceiling. If your bank fails, the FDIC guarantees your principal and accrued interest up to $250,000. Anything above that amount in the same ownership category at the same institution is uninsured and can be lost entirely.1Federal Deposit Insurance Corporation. Deposit Insurance FAQs
The National Credit Union Administration provides identical $250,000 coverage at federally insured credit unions.2National Credit Union Administration. Share Insurance Coverage The protection works the same way in both cases: per depositor, per institution, per ownership category.
That last piece is where the cap becomes flexible. The FDIC recognizes several distinct ownership categories, including single accounts, joint accounts, certain retirement accounts, trust accounts, business accounts, and government accounts.3Federal Deposit Insurance Corporation. Account Ownership Categories Each category gets its own separate $250,000 of coverage. All deposits you hold in the same category at one bank are added together and insured as a group. A $150,000 CD and a $120,000 savings account, both in your name alone at the same bank, total $270,000 in the single-account category, and $20,000 sits uninsured.
How to Insure More Than $250,000 at One Bank
You can protect well over $250,000 at a single institution by spreading money across ownership categories. A married couple can structure their CDs to reach $1.5 million in coverage at one bank. Each spouse holds an individual CD insured up to $250,000, for $500,000 combined. A joint CD adds another $500,000 (each co-owner is insured up to $250,000 on joint deposits). If both spouses also hold IRA CDs, each IRA sits in the retirement category with its own $250,000 limit, bringing the total to $1.5 million fully insured.1Federal Deposit Insurance Corporation. Deposit Insurance FAQs
Trust and Payable-on-Death Accounts
Naming beneficiaries on a payable-on-death or revocable trust CD adds another layer. Each eligible beneficiary increases the owner’s coverage by $250,000, capped at $1,250,000 per owner. Naming five or more beneficiaries maxes out the trust category.4Federal Deposit Insurance Corporation. Trust Accounts
A rule change took effect April 1, 2024. The FDIC now combines all of your trust deposits at a single bank, whether they’re informal POD accounts, formal revocable trusts, or irrevocable trusts. The $1,250,000 cap applies to the combined total across all trust types, not to each type separately.4Federal Deposit Insurance Corporation. Trust Accounts Setting up a POD CD and a separate revocable trust CD at the same bank no longer doubles the coverage.
Deposit Placement Networks
For depositors with millions to protect, deposit placement networks are an alternative to opening accounts at dozens of banks. Services like CDARS, run through the IntraFi network, let you deposit a large sum at one bank, which then splits your funds into amounts below $250,000 and distributes them across other FDIC-insured banks in the network. You deal with one bank and receive one statement, but each slice sits at a separate insured institution.5IntraFi. IntraFi FAQ You’re limited to participating banks and the rates they offer.
Bank Minimums and Maximums
Separate from the insurance cap, each bank sets its own floor and ceiling. Most standard CDs require somewhere between $0 and $1,000 to open. Jumbo CDs, which historically paid slightly higher rates, typically start at $100,000. There’s no universal regulatory definition of “jumbo,” so thresholds vary.
On the upper end, banks sometimes cap the total they’ll accept from a single customer. A bank with a $5 million internal cap won’t let you open a $10 million CD no matter how you’d like to fund it. Large, sudden inflows require the bank to hold additional regulatory capital, and deposit caps also fit into anti-money-laundering controls, since federal law requires reporting cash transactions over $10,000.6FFIEC BSA/AML InfoBase. Assessing Compliance with BSA Regulatory Requirements – Currency Transaction Reporting If you’re planning an unusually large deposit, call the bank first.
The Access Limit: Early Withdrawal Penalties
Once your money is in a CD, the term itself is a limit. Break the agreement early and you forfeit interest. This penalty is the most consequential day-to-day constraint on a CD because it decides whether your money is truly accessible.
Federal rules set a floor. If you withdraw within the first six days after depositing, the bank must charge at least seven days of simple interest.7Office of the Comptroller of the Currency. CD Penalties Beyond that minimum, banks set their own schedules. A common structure for a one-year CD is 90 days of interest. Longer terms carry steeper penalties, often 180 days to a full year of interest on a five-year CD.
Here’s the trap: if your CD hasn’t accrued enough interest to cover the penalty, the bank takes the difference out of your original deposit. On a CD you opened recently and need to break, you can walk away with less than you put in. Any forfeited interest is deductible on your federal return, reported on Schedule 1, Line 18 of Form 1040, and it reduces your adjusted gross income whether or not you itemize.8Internal Revenue Service. Schedule 1 (Form 1040) – Additional Income and Adjustments to Income
Two products soften this limit. A no-penalty CD lets you withdraw the full balance after a short waiting period, often seven days, without forfeiting interest, though most require you to close the account when you withdraw and pay lower rates than standard CDs. A brokered CD, sold through a brokerage firm, is exited by selling on the secondary market rather than paying a penalty; if rates have risen since you bought it, you may sell at a loss, and there’s no guarantee of a buyer.
What Happens When Your CD Matures
Maturity opens a short grace period, typically 7 to 10 calendar days, during which you can withdraw, change the term, or close the account. If you do nothing, most banks automatically renew the CD into a new term at whatever rate they’re currently offering. That rate can be well below what you originally locked in, and once the grace period closes, you’re back inside a term with full early withdrawal penalties on the renewed CD. Banks are required to notify you before maturity, but the notices are easy to miss. Set a calendar reminder a few days before the maturity date so the decision is yours.
Tax on CD Interest
CD interest is taxed as ordinary income at your regular federal rate, not at the lower capital gains rate. Your bank sends a 1099-INT each year reporting interest of $10 or more.9Internal Revenue Service. Tax Topic 403 – Interest Received
The timing rule surprises buyers of multi-year CDs. You owe tax on interest in the year it’s credited to your account, even if you can’t withdraw it without a penalty. If a five-year CD credits interest annually, you report that income each year, not just at maturity.9Internal Revenue Service. Tax Topic 403 – Interest Received For a large CD position in a higher tax bracket, the annual tax drag meaningfully reduces the effective return.