Add-On CDs

Add-on CDs are a low-risk investment that accrues interest and safeguards your principal. It allows for an initial deposit lower than traditional CDs, with the option to make additional contributions until maturity. Inclusion of add-on CDs in your diversified retirement portfolio can help you build your savings.

  • Written by
    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers Medicare, life insurance and dental insurance topics for RetireGuide. Research-based data drives her work.

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    Michael Santiago
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    Michael Santiago

    Senior Financial Editor

    Michael Santiago, a senior financial editor, joined RetireGuide in 2023. With over 10 years of professional writing and editing experience, he brings a wealth of expertise in creating content for diverse industries, including travel and healthcare. Having traveled to more than 40 countries across five continents and lived in Europe and Asia for several years, Michael's global perspective enriches his work. He combines his strong writing skills, editorial judgment and passion for crafting accurate and engrossing content to enhance the user experience on RetireGuide.

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    Timothy Li, MBA, Business Finance Manager

    Timothy Li, MBA

    Business Finance Manager

    Timothy, an experienced consultant and finance manager, excels in uncovering narratives within financial data for CEOs and CFOs. With a focus on enhancing profitability, he leads conference calls, analyzes performance trends and provides financial training. Holding an MBA from USC and an economics degree from UCLA, Timothy is well-equipped to navigate the intricacies of the business world.

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  • Published: June 26, 2023
  • Updated: July 17, 2023
  • 7 min read time
  • This page features 3 Cited Research Articles
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How to Cite's Article

APA Crossmier, L. (2023, July 17). Add-On CDs. Retrieved July 24, 2024, from

MLA Crossmier, Lindsey. "Add-On CDs.", 17 Jul 2023,

Chicago Crossmier, Lindsey. "Add-On CDs." Last modified July 17, 2023.

Key Takeaways
  • Add-on CDs are timed savings accounts that allow you to continue to contribute to the account after your initial deposit.
  • As with traditional CDs, you pay a penalty if you withdraw from the account before it matures.
  • Each bank or credit union will offer its own interest rates and terms, so it pays to shop around.
  • Considered a low-risk investment, add-on CDs can be part of your balanced retirement portfolio.

What Are Add-On CDs?

Add-on CDs are certificates of deposit that offer the flexibility to continuously add funds. Unlike regular CDs where the initial deposit earns interest until maturity, add-on CDs enable individuals to make additional deposits up until the maturity date.

CDs, available at the majority of banks and credit unions, present low-risk investment options that can significantly enhance your retirement investment portfolio. This is especially advantageous if your current financial resources are limited, but you anticipate increased funds in the future. Add-on CDs provide an opportunity to bolster your savings by allowing additional deposits beyond the initial investment.

How Do Add-On CDs Work?

Financial institutions provide low-risk investment options through CDs. With a CD, you deposit funds into an interest-earning account for a predetermined duration, ranging from six months to several years. During this period, withdrawing the principal before the specified timeframe results in a penalty. Add-on CDs, however, offer the flexibility to continue adding funds to the initial deposit until the designated time frame elapses.

The specific terms and interest rates associated with add-on CDs vary depending on the chosen bank or credit union. Many financial institutions offer lower minimum deposit requirements for add-on CDs, although each institution establishes guidelines regarding the timing, frequency and amount of additional contributions allowed. While certain institutions may permit additions to the principal at any time, others may only allow contributions at the start of a year or impose a maximum limit on the total deposit amount.

CDs provide interest earnings in exchange for the funds being held for a specified duration. Certain banks and credit unions offer reduced interest rates for add-on CDs due to the potential for changes in the total deposit amount until maturity. It is important to research as interest rates and terms vary among different financial institutions.

The interest rate for add-on CDs remains constant throughout the duration of the CD, and your earnings increase as you make additional contributions to your initial deposit. However, penalties for early withdrawal remain applicable. If you withdraw funds before the add-on CD matures, a significant portion of the interest may be forfeited, and you could be responsible for additional fees based on the terms established by the financial institution. Upon maturity of the add-on CD, you can withdraw your funds without penalties.

Add-on CDs are a low-risk, flexible vehicle to accrue interest. However, it is a bit more challenging to find a bank that offers them. Contact a finance professional to see whether an add-on CD would help to achieve your goals.

Add-On CDs vs. Traditional CDs

Traditional CDs and add-on CDs share certain similarities. Both types of CDs accrue interest, function as timed deposit accounts and impose penalties for early withdrawal. Additionally, both are subject to the rules and regulations set forth by FDIC insurance. However, specific details such as the minimum deposit requirement, interest rate and term duration differ across different banks and credit unions, as they offer varying options.

The key difference lies in the ability to increase your initial deposit with an add-on CD. Unlike traditional CDs, add-on CDs provide the flexibility to add funds at your discretion without penalties. This means you have the freedom to allocate funds according to your current needs, without sacrificing immediate financial requirements for future returns.

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Pros and Cons of Investing in Add-On CDs

Like other savings options, add-on CDs come with both advantages and disadvantages. Assessing your individual needs and circumstances will help you to determine whether they are the appropriate investment choice for you.

Add-On CDs: Pros and Cons
  • Add-on CDs generally have a low required deposit limit, so you can open an account with minimal funds.
  • Interest rates for an add-on CD are fixed.
  • The rates are federally insured and provide protection for the investment.
  • Add-on CDs can come with lower interest rates than other types of CDs. They also have an interest rate that doesn’t increase over time.
  • The same withdrawal penalties apply as with regular CDs.
  • Not all financial institutions offer add-on CDs: they are harder to find.

Is Investing in Add-On CDs Right for You?

Depending on your investment goals, add-on CDS can be a smart addition to your retirement savings. Add-on CDs offer a low-risk avenue for accruing interest on savings, allowing individuals to build their funds when they have extra cash. While excessive investment in CDs can leave one vulnerable to inflation and render all funds inaccessible, add-on CDs serve as a viable option to diversify portfolios with minimal risk.

It is advisable to consult with a financial advisor, regardless of whether you are just starting to save or approaching retirement. By seeking professional guidance, you can gain a deeper understanding of how add-on CDs can be incorporated into your comprehensive retirement plan. RetireGuide has an online tool to help you connect with a financial advisor who fits your specific needs.

How Can You Invest in Add-On CDs?

You can find add-on CDs at banks and credit unions, including some online-only banks. Not all banks or branches offer add-on CDs, and each financial institution will offer its own unique interest rates, term lengths and deposit minimums. Comparing options can be beneficial as banks and credit unions occasionally provide limited-time promotions with higher interest rates. Taking the time to explore various offers can potentially result in finding better returns on your investments.

Opening an add-on CD account follows the same process as any other bank account. Selecting a financial institution where you already have an account can speed up the process. Carefully review the terms and conditions, and seek clarification by asking questions to gain a clear understanding of the allowed investment amounts after the initial deposit and the penalties for early withdrawals.

How Can You Maximize Returns With Add-On CDs?

Add-on CDs are considered a low-risk investment option, which also means you’re less likely to see high returns. Explore different options for the best rates to maximize your earnings, as even a marginal increase of half a percent in interest can add up over time.

Selecting longer-term add-on CDs could result in higher interest rates. These CDs provide the flexibility to avoid initially committing all of your funds. Opting for longer-term options is recommended in this scenario. Additionally, maximizing your contributions whenever possible enhances your earning potential.

To benefit from higher interest rates without locking up all of your funds for the entire term, consider implementing a CD ladder strategy. This involves dividing your total investment into separate CDs with increasingly distant maturity dates. As each term matures, you can reinvest the principal and interest, allowing your money to continue growing. For guidance on selecting the best investment strategy for your individual circumstances, consult with a financial advisor.

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FAQs About Add-On CDs

How do add-on CD interest rates compare to other retirement investment options?
The ability to contribute to the account long after your initial deposit offsets the lower interest rates typically associated with add-on CDs compared to traditional CD rates.
How can you evaluate whether an add-on CD is a suitable investment option for your retirement portfolio?
Depending on your needs and risk tolerance, add-on CDs can be a suitable addition to your diversified savings portfolio because they are considered low-risk.

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Last Modified: July 17, 2023

3 Cited Research Articles

  1. Consumer Financial Protection Bureau. (2017, January 4). The interest rate offered for CDs (certificates of deposit) is low. Is there anything I can do about that? Retrieved from
  2. U.S. Securities and Exchange Commission. (n.d.). Certificates of Deposit (CDs). Retrieved from
  3. U.S. Securities and Exchange Commission. (n.d.). High-Yield CDs: Protect Your Money by Checking the Fine Print. Retrieved from