Frequently asked questions

CDs vs. Other Interest-Bearing Accounts

 

What’s the difference between a CD and an annuity?

A CD is a timed-deposit account in which you deposit money for a set period of time (term) and earn a fixed rate of interest. CD terms typically range from six months to three years, and if you withdraw funds before the end of the term, you will pay a penalty. At BBVA Compass, the minimum opening deposit for a CD is $500.

An annuity is actually an insurance product, not a deposit product, frequently used for long-term retirement savings. With an annuity, you invest an amount of money and after a period of time, you can receive payments from the annuity on a monthly, quarterly, or annual basis or you can request a one-time payment. The primary goal of an annuity is to provide a steady stream of income, typically during retirement.

One of the biggest advantages of an annuity is you can invest significant sums and defer paying income taxes on your earnings until you start receiving payments. However, annuities are long-term instruments that may charge penalties if you withdraw funds within the first five to seven years. Fees can also be relatively high on annuities.

As with any financial product, it makes sense to clearly understand the account and how it works—including fees and penalties—prior to opening an account.

What’s the difference between a CD and a bond?

Bonds are issued when investors loan money to an entity. Companies, municipalities, states, and governments issue bonds to raise money for operations, expansions, or special projects.

Bonds are called fixed-income securities because they are issued for a defined period of time and earn a fixed rate of interest. Once the bond term is up, investors receive their original investment plus interest earned. You can purchase bonds through a bank, broker, or dealer.

As with any financial product, it makes sense to clearly understand the account and how it works—including fees and penalties—prior to opening an account.

What’s the difference between a CD and a money market account?

A money market account is also an interest-bearing deposit account available at most banks and financial institutions. With a money market account, you can deposit money at any time and it will begin earning interest. Many money market accounts offer tiered interest rates. The more you deposit, the greater your opportunity to earn may be.  

There are three main differences between money market accounts and CDs:

  • Access: With money market accounts, you can access your funds at a BBVA Compass branch or ATM at any time without penalty. You can also make deposits to your account at any time. With a CD, you cannot access your money during the CD term. If you do make a withdrawal, you will pay a penalty. You cannot make deposits to a CD during the term.
  • Interest: The tradeoff of having your money “locked up” in a CD is that you may earn a higher rate of interest than you do with a money market account.
  • Time: CDs are open for a determined time period, or term, whereas there are no set closing or maturity dates for money market accounts.

Get started with a Certificate of Deposit (CD)

Want to start earning more interest on your savings? Learn more about our BBVA Compass Certificates of Deposit (CDs).