A Certificate of Deposit (CD) is a type of time deposit offered by banks and credit unions. It holds a fixed amount of money for a set term in exchange for a fixed interest rate. Unlike a standard savings account, funds are typically locked away until maturity, and early withdrawal often incurs a penalty. The number of CDs a person can own is determined by federal regulations, institutional policies, and the investor’s strategic goals. While there is no legal limit to the number of accounts, there are limits on the dollar amount that is federally protected. The primary constraint on holding multiple CDs relates to deposit insurance coverage and minimizing risk.
How FDIC Insurance Determines the Maximum Insured Amount
The primary constraint on the dollar amount held in Certificates of Deposit relates to the protection offered by the Federal Deposit Insurance Corporation (FDIC). The FDIC is an independent agency that protects depositors against the loss of their insured deposits if an FDIC-insured bank fails. The standard maximum deposit insurance amount is currently $250,000. This limit is applied “per depositor, per insured institution, per ownership category.”
This means all Certificates of Deposit, along with other deposit accounts like checking and savings accounts, held by one person in the same ownership category at a single bank are aggregated to calculate the insurance limit. If a person has $100,000 in a CD and $150,000 in a savings account at the same bank, the total $250,000 is covered. If the total deposit amount at that institution exceeds $250,000, any funds above that threshold are considered uninsured and are at risk if the bank were to fail.
The goal for a financially prudent investor holding large balances is to ensure all funds remain under this federal insurance umbrella. This is achieved not by arbitrarily opening many accounts, but by carefully distributing funds across different insured institutions or by utilizing distinct ownership categories recognized by the FDIC.
Expanding Coverage Through Different Ownership Categories
An individual can legally hold far more than $250,000 in Certificates of Deposit and still maintain full federal protection by utilizing the various FDIC ownership categories. The FDIC recognizes several distinct legal ownership types, treating the funds in each category separately for insurance purposes.
Single, Joint, and Retirement Accounts
The most common categories include single accounts, joint accounts, and certain retirement accounts, such as Individual Retirement Arrangements (IRAs). For example, a person can have $250,000 in a CD held in a single account, and then also hold an additional $250,000 in a CD within a retirement account at the same bank, resulting in a total of $500,000 in insured deposits. A joint account, owned by two or more people, is insured up to $250,000 per co-owner, effectively doubling the coverage to $500,000 for that single account.
Revocable Trust Accounts
Utilizing a revocable trust account is another mechanism that can significantly expand insurance coverage. Funds held in a revocable trust, often called Payable-On-Death (POD) accounts, are insured up to $250,000 per unique beneficiary. The beneficiary must be a natural person, charity, or non-profit organization. If a person has a CD titled as a revocable trust account with five beneficiaries, the total insured amount on that single CD can reach $1.25 million. By strategically dividing large amounts of money across these different ownership categories within a single bank, a depositor can ensure a substantial amount of total savings is fully protected.
Institutional Restrictions on Account Numbers
While federal regulations focus on the dollar amount of insured deposits, the financial institutions themselves may impose limits on the number of Certificates of Deposit an individual can hold. There is no overarching federal law that restricts the number of CD accounts a person can open. However, a bank or credit union can establish its own internal policies regarding the number of accounts per customer as part of its terms and conditions.
A financial institution might place a cap on the total dollar amount a single customer can have on deposit, regardless of ownership category, as a matter of internal risk management or operational capacity. More commonly, some banks specify a maximum number of CD accounts a customer can open, such as a limit of 40 accounts. These institutional limits are not related to deposit insurance but are driven by the bank’s administrative and compliance burden of managing a large number of small accounts for one customer. Therefore, a person may find that their ability to open a new CD is restricted by the specific bank’s policy.
Practical Limits and the Use of CD Ladders
The most practical limit on the number of Certificates of Deposit a person should have is determined by investment strategy and logistical management, rather than strict legal or institutional caps. The primary reason investors choose to open multiple CDs is to implement a strategy known as CD laddering. This approach involves dividing a lump sum of money into several smaller CDs with staggered maturity dates.
The laddering method addresses two common drawbacks of single, long-term CDs: interest rate risk and liquidity risk. It reduces interest rate risk by ensuring that as each short-term CD matures, the funds can be reinvested at the current prevailing interest rate, allowing the investor to capture higher rates if they have risen. It simultaneously increases liquidity because a portion of the funds becomes available at regular intervals without incurring early withdrawal penalties.
A saver’s “limit” on the number of CDs is generally the point at which managing the maturity dates and reinvestment decisions for dozens of individual accounts becomes overly complicated and inefficient. The number of rungs in a CD ladder is entirely flexible and should only be as numerous as necessary to meet the investor’s specific liquidity needs and interest rate outlook.