Types of CDs Explained: No-Penalty, Bump-Up, Jumbo, Brokered and IRA CDs

Compare the main types of certificates of deposit, how each works, their pros and cons, and which situations they suit best.

By the Dayob Editorial Team · Updated · 3 min read

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A standard CD pays a fixed rate for a fixed term with a penalty for early withdrawal. Banks and brokerages offer several variations that trade a little yield for flexibility, or vice versa. Here's how they compare.

Traditional CD

Fixed rate, fixed term, penalty for early withdrawal. The simplest option and usually the benchmark for rates. Terms range from about one month to ten years.

No-penalty (liquid) CD

You can withdraw the full balance after a short initial period, often a week, without penalty. Rates are usually somewhat lower than traditional CDs of similar length. Useful for money you'll probably not need but want available.

Bump-up and step-up CDs

  • Bump-up: lets you request a rate increase, usually once or twice during the term, if the bank's rate for new CDs rises.
  • Step-up: the rate increases automatically on a schedule.

Both typically start with a lower rate than a traditional CD. Compare the average rate over the whole term, not just the final one.

Jumbo CD

Requires a large minimum deposit, traditionally $100,000. Some pay a slightly higher rate, though not always. Keep FDIC limits in mind: coverage is $250,000 per depositor, per insured bank, per ownership category.

Add-on CD

Allows additional deposits after opening, which is useful if you save a little each month but want a fixed rate.

Brokered CD

Bought through a brokerage account rather than directly from a bank. Brokered CDs from FDIC-insured banks carry FDIC insurance, and you can sell them before maturity on a secondary market instead of paying a penalty. But their market price changes with interest rates: if rates have risen, you may sell for less than you paid. Some brokered CDs are "callable," meaning the issuing bank can redeem them early.

IRA CD

A CD held inside an individual retirement account, so it follows IRA rules for contributions, taxes and withdrawals. Withdrawals before age 59½ may carry IRS penalties in addition to the bank's early withdrawal penalty, unless an exception applies.

Quick comparison

TypeRate (relative)Flexibility
TraditionalStandardLow
No-penaltySlightly lowerHigh
Bump-up / step-upLower at startRate flexibility
JumboSometimes higherLow
BrokeredVariesCan sell, but at market price

Comparing offers

Whatever the type, compare APY, term, minimum deposit, penalty terms and what happens at maturity. Use the CD calculator to compare ending balances. For the trade-off with savings accounts, see CD vs. high-yield savings; to combine several CDs, see CD ladders.

Educational content only, not financial advice.

Further reading from official sources

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