Are CDs FDIC Insured? (2024)

With interest rates as high as they are, you might be looking for a better way to put your cash to work. Similar to a traditional savings account, CDs—or certificates of deposit—help you earn interest on the money you keep in a bank.

In exchange for putting your cash in a CD for a specific period of time, you’ll earn a higher interest rate than you would from a regular savings account.

But is there a catch? Are CDs insured by the Federal Deposit Insurance Corporation (FDIC) like your savings account? Here’s what you need to know about FDIC coverage before moving your money to a CD.

Are CDs FDIC-Insured?

The short answer is yes. CDs are federally insured by the FDIC.

The FDIC insures deposit accounts up to $250,000 per depositor, per FDIC-insured bank and per ownership category. This includes savings and checking accounts as well as money market accounts and CDs. Insurance coverage applies to the principal balance and any interest that accrues in a covered account.

The purpose of this coverage is to protect you in case your bank fails. While bank failures are rare, they’re far from unheard of. Recent examples include the collapse of Silicon Valley Bank and First Republic Bank in 2023.

Thanks to high interest rates, CDs are one way to increase the return you get on money you keep at the bank. However, unlike a savings account, CDs require you to give up access to your cash for a set period, ranging from one week up to 10 years or more. That span of time, known as a term, enables the CD issuer to invest in securities—which generally have higher yields—for a slightly longer period of time. That’s why CDs tend to pay more than savings accounts.

Better yet, FDIC coverage adds a layer of protection and safety to safeguard your cash.

How Does FDIC Insurance Work for CDs

FDIC insurance works for CDs by giving account holders peace of mind even if their bank fails. It ensures that you won’t lose a single cent as long as your balance doesn’t exceed $250,000. If a bank goes under, the FDIC will take over the bank’s assets and resume operations on behalf of the bank. When the FDIC stepped in for Silicon Valley Bank, it moved the bank’s assets to an FDIC-operated “bridge” bank, allowing customers to continue accessing their deposits and carry on business as normal.

A bridge bank is a temporary national bank chartered by the Office of the Comptroller of the Currency and organized by the FDIC. It takes over assets from a failed bank and maintains banking services. Typically, the FDIC sells failed banks shortly after assuming control of them.

Verify a Bank’s Status

Before finalizing your choice of a bank, it’s important to verify that it is a member of the FDIC. As long as it is, your accounts—including CDs—automatically qualify for FDIC insurance. To find out whether a bank is a member of the FDIC, check the FDIC’s BankFind database.

As mentioned, FDIC coverage applies per depositor and per ownership category. Keeping money in different ownership categories lets you qualify for additional coverage. For example, if you open a CD as an individual but also maintain a separate joint savings account with your spouse, those are considered two separate ownership categories. The FDIC will cover each owner of the joint account up to $250,000—for a total of $500,000—and your individual account would qualify for up to $250,000 in coverage as well.

If you have an individual bank account with a balance above $250,000, odds are the funds exceeding that threshold are not covered. But if you have $200,000 in savings and $100,000 in checking, each of those two accounts would be covered for up to $250,000 in case of a bank failure. So you wouldn’t lose a penny if your bank collapsed.

The best way to guarantee coverage for all your cash deposits is to split your money up and keep it in different accounts. You might want to do this anyway because different banks offer different CD rates. Some of the best CD rates come from banks that offer online accounts and don’t operate brick-and-mortar branches. Fortunately, online banks are FDIC-insured too.

What Is the FDIC Limit on CDs?

Just like traditional checking accounts, the FDIC coverage limit on CDs is $250,000. You can qualify for more than $250,000 of deposit insurance, but you must keep your cash in different accounts to get greater coverage.

There are some exceptions to the $250,000 rule. Trusts, for example, can be insured for up to $1,250,000 because you can name up to five beneficiaries, each of whom receives up to $250,000 in coverage. And cash management accounts—deposit accounts offered by brokerages to hold uninvested funds—may offer millions of dollars in FDIC insurance by spreading customers’ assets across numerous FDIC-insured partner banks.

Are Brokered CDs FDIC-Insured?

Brokered CDs are CDs sold by independent brokers or brokerage firms rather than banks. The FDIC only covers banks, which means products offered by brokerage firms are not covered by FDIC insurance.

Purchasing brokered CDs is similar to buying stocks because brokered CDs are purchased with funds from securities accounts, and they are treated as investment products rather than deposit accounts. Brokers that sell brokered CDs often resell them instead of offering them directly from a bank. Because brokered CDs are treated as securities rather than deposits, they don’t always qualify for the same coverage.

But the lack of FDIC insurance doesn’t mean you should shun brokered CDs. Brokerage firms have insurance coverage similar to the FDIC’s but provided by the Securities Investor Protection Corporation—or SIPC. In the event of a brokerage firm failure, investors are protected for up to $500,000.

Before purchasing a brokered CD, request information about how the CD is structured and what insurance coverage protects it.

What CDs Are Not FDIC-Insured?

Some CDs are not covered by either FDIC or SIPC insurance coverage. For instance, CDs offered by credit unions do not have either of those protections. That’s because credit unions are legally different from banks. Still, credit union CDs come with their own insurance offered by the National Credit Union Administration, or NCUA.

Similar to the FDIC, the NCUA has its own insurance program in place that covers depositors up to $250,000 per institution and per ownership category. This means your CD is still covered but by a different regulatory body.

CDs purchased through foreign banks are also not FDIC-insured. The FDIC is a U.S.-based banking regulator designed to protect the soundness of the U.S. banking system. You can save money in a CD account outside of the United States, but it won’t come with the same protections you can expect to get from a bank based in the United States.