A certificate of deposit, or CD, is a timed deposit savings account, meaning it has a specified term, typically one to three years. During this time, you earn a fixed rate of interest. At the end of the term, also called maturity, you can either terminate the account or automatically renew the account on the same terms.
The difference between a CD and a traditional savings or money market account is that during the term you do not have access to your money. If you withdraw funds from the account prior to maturity, you will pay a penalty fee.
So why would you choose a CD instead of a savings account? Because CDs typically pay higher rates of interest than traditional savings or money market accounts.
Here are a few things that you should know about how a CD works:
Interest: The amount of interest your CD earns depends on the length of the term you select. Rates, quoted as an Annual Percentage Yield (APY), are a fixed rate of interest that determines how much money you earn on a deposit over a year, plus compounding interest. The interest on your account will compound daily with a CD from BBVA.
Minimum balance: The minimum deposit required to open a BBVA CD account of any term is $500.
Additional deposits: After your CD account is opened, you may not make additional deposits into the account.
Early withdrawal penalty: If you withdraw funds before your CD reaches maturity, you will be charged an early withdrawal penalty. The penalty fee is based on your CD’s term.
If your CD term is 365 days or less, the early withdrawal penalty is $25 plus one percent of the amount withdrawn. If your CD term is greater than 365 days, the early withdrawal penalty is $25 plus three percent of the amount withdrawn.
FDIC insured: Like your BBVA checking account, your CD account is insured by the Federal Deposit Insurance Corporation (FDIC). This means your money is insured up to the federal maximum in case the bank closes or fails to meet its obligations to depositors.
The minimum opening deposit for a CD is $500.
You cannot make additional deposits to a CD during the account term.
Under federal law, banks must identify the owner of a CD when it is open, so you cannot open a CD and give it to someone else. You can, however, open a CD on behalf of a child and make a gift deposit to open the CD.
Typically, you cannot. Once the CD matures, or the term is up, you are free to do whatever you like with the funds, but during the term, most CDs are not transferable.