How Much Money Can You Put in a CD?

A Certificate of Deposit (CD) offers a secure way to save money, functioning as a type of savings account that holds a fixed amount for a predetermined period. It provides a fixed interest rate, meaning earnings remain consistent throughout the CD’s term. This structure makes CDs a popular choice for individuals seeking predictable returns and a reliable method for preserving initial capital.

FDIC Deposit Insurance

The Federal Deposit Insurance Corporation (FDIC) safeguards deposits held in banks and savings associations. Its function is to maintain stability and public confidence in the financial system by insuring customer deposits. This insurance protects depositors from losses if an FDIC-insured institution fails, covering up to $250,000 per depositor.

The standard insurance coverage applies per depositor, per insured bank, for each account ownership category. For instance, a single account, owned by one person, is insured up to $250,000. Joint accounts, owned by two or more people, are insured separately for up to $250,000 per co-owner, meaning a joint account with two owners could be insured for up to $500,000.

Retirement accounts, such as Individual Retirement Accounts (IRAs), are also insured separately from other accounts, up to $250,000 per depositor. This distinct coverage for different ownership categories allows individuals to deposit more than $250,000 at a single institution and still have all funds fully insured. For example, a person could have $250,000 in a single account, $250,000 in an IRA, and $250,000 as their share in a joint account at the same bank, all fully insured.

Depositors can further increase their total insured amount by spreading their funds across multiple FDIC-insured financial institutions. Since the $250,000 limit applies per bank, depositing money into different banks provides separate insurance coverage at each institution. This strategy allows individuals to protect very large sums of money while benefiting from the security of federal deposit insurance.

Bank Specific Deposit Maximums

Beyond the federal insurance limits, individual financial institutions often establish their own internal maximum deposit amounts for Certificates of Deposit. These bank-specific limits can vary significantly and are distinct from the FDIC’s coverage thresholds. A bank might set these maximums for various reasons, including managing its overall liquidity and controlling its exposure to interest rate fluctuations.

Institutions also consider their operational capacity when determining how much they are willing to accept in large deposits. Accepting an unusually high volume of large deposits can strain a bank’s ability to effectively manage its balance sheet and allocate funds. This means a large national bank might have a much higher internal maximum for CD deposits than a smaller community bank.

Online-only banks, which often operate with lower overhead, may also have different thresholds compared to traditional brick-and-mortar institutions. These internal limits represent the bank’s comfort level with the amount of capital they wish to hold in specific deposit products. Therefore, even if an amount is fully covered by FDIC insurance, a bank might decline a deposit that exceeds its internal cap.

To ascertain these specific maximums, individuals should consult the terms and conditions provided by the financial institution. This information is typically available on the bank’s website or can be obtained by contacting their customer service department directly. Understanding these bank-imposed limits is important for depositors planning to place very large sums into CDs.

CD Account Structures and Deposit Ranges

The structure of a Certificate of Deposit often dictates the range of possible deposit amounts, from initial minimums to higher capacities. Standard CDs, which are the most common type, typically require a relatively modest minimum deposit, often ranging from $500 to $2,500. These accounts generally accommodate a broad spectrum of deposit sizes, extending up to the individual bank’s internal maximum limits.

Jumbo CDs represent another category, distinguished by their significantly larger minimum deposit requirements. These CDs usually mandate a minimum deposit of $100,000 or more. In exchange for the larger principal, jumbo CDs sometimes offer slightly higher interest rates compared to standard CDs, reflecting the economies of scale for the issuing institution.

Brokered CDs are purchased through a brokerage firm rather than directly from a bank. This mechanism allows investors to access CDs from a wide array of issuing banks, providing a broader selection of maturities and interest rates. Brokered CDs can be particularly useful for individuals looking to deposit very large sums.

Through a brokerage account, an investor can purchase CDs from multiple banks, each providing its own FDIC insurance coverage up to the $250,000 limit. This strategy enables the investor to distribute a substantial amount of capital across various institutions while managing all their CD holdings conveniently through a single brokerage platform. The brokerage firm handles the placement of funds with the individual issuing banks, simplifying the process for the depositor.

Tax Considerations for CD Earnings

Interest earned on Certificates of Deposit (CDs) is considered taxable income for both federal and, where applicable, state income tax purposes. This income is taxed in the year it is earned or credited to the account, even if not withdrawn until the CD matures. Financial institutions report interest income to the Internal Revenue Service (IRS) and to the depositor.

A Form 1099-INT is issued by the financial institution to the depositor if interest earned on a CD, or other accounts, is $10 or more in a calendar year. This form details the amount of interest income that must be included in the taxpayer’s annual income tax return.

For those with substantial CD deposits, accumulated interest can significantly increase their taxable income. This could place them in a higher marginal tax bracket, leading to a greater overall tax liability. Individuals should understand how this interest income integrates with their other earnings when calculating their total tax obligation.

Holding CDs within tax-advantaged accounts, such as Individual Retirement Accounts (IRAs), modifies the tax treatment of the interest earned. In a traditional IRA, earnings grow tax-deferred, with taxes paid upon withdrawal in retirement. For Roth IRAs, contributions are made with after-tax dollars, and qualified withdrawals, including interest, are entirely tax-free in retirement.