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Are Online Certificates of Deposit (CDs) Safe? – Investopedia

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.
Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.
Certificates of deposit (CDs), whether purchased online or at a brick-and-mortar bank, are perfectly safe places to stash your cash as long as you follow these rules:
Certificates of deposit are popular products for savers looking to put aside some money for the short term in return for a better rate of interest than an ordinary savings account usually gets.
If it is FDIC-insured, as almost all banks are, CDs are considered among the safest investments available because the investor can't lose the principal, as is all too possible in the stock market, and because the principal is insured even in the event of a financial collapse by the institution that holds the money.
Moreover, the interest rate is fixed and guaranteed. It can't be reduced during the term of the CD if interest rates in the world at large decrease. (It won't be increased if interest rates rise, either.)
It's worth noting that the FDIC has been in operation since 1933 and no depositor has since lost a penny from a bank deposit.
Your money is equally safe in a savings account or a CD. Both types of deposits are federally insured against losses for up to $250,000 per depositor per institution. A joint CD account is insured for up to $500,000.
A CD commits you to leaving the money in the account for a set term, which can be anywhere from a few months to 10 years or more. They usually pay a little more in interest than a savings account. Generally, the longer the commitment, the higher the interest rate.
You can get your money out of a CD before it matures but there's a penalty for doing so. The amount of the penalty is up to the institution, but it can eat into the interest you earn if not eliminate it.
Like savings accounts, CDs are available at almost any bank, online or off. They're also available from credit unions and brokerages.
The CDs offered by online banks are just as safe as those offered by their giant corporate peers, as long as their deposits are federally insured. It is very rare for a financial institution, online or off, to not be FDIC insured. A few small banks are state-insured instead.
If you want to make sure that a bank is FDIC you can use the FDIC's BankFind database.
That said, it always pays to be wary of outright scams. 
When you open a CD with an FDIC- or NCUA-insured institution, up to $250,000 of your funds on deposit with that institution are protected by the U.S. government if that institution were to fail. The figure is $500,000 for joint accounts.
If you have more than $250,000 to invest, you can split it between institutions to make sure it’s all protected.
These guarantees apply to online banks just as they do to traditional brick-and-mortar banks. This means that CDs at online banks are just as safe as those held with Main Street banks.
There is a benefit to investing in a CD online rather than in person.
It’s now possible to shop for CDs at more than 150 banks that accept customers nationwide. This creates a lot of competition to offer higher interest rates on CDs and greatly expands your choices beyond your own neighborhood.
The lack of significant infrastructure and overhead costs enables online-only banks to pay higher interest rates or annual percentage yields (APY) on CDs and other types of savings. The most generous of them offer as much as 1% to 2% more than you’ll earn on accounts at a traditional bank. 

About 56% of account holders do at least some of their banking via the internet.
CDs are subject to fraud, just like any other investment product. And it's easier to put up a fake website than it is to put up a fake brick-and-mortar bank. If you have any doubts about the legitimacy of a company you are dealing with you, you should verify that they are who they say they are.
The U.S. Securities and Exchange Commission (SEC) suggests several ways to do this:
As long as the company offering CDs is registered in this way, your money should be safe. 

CDs are among the safest investment products possible. The principal is safe, unlike in many investments. And the interest rate is guaranteed. Just make sure you're getting the CD from a federally-insured institution.
There are many trustworthy and safe online banks. Fifty-six percent of account holders do at least some of their banking on the internet. Online banks often offer better returns on your money than their Main Street competitors. As always on the internet, beware of scams.
You may get a better interest rate from an online bank. For one thing, they have lower overhead costs and can afford to be more generous. Moreover, the internet gives you access to about 150 banks across the country that allow out-of-state depositors. CD rates vary widely, so it pays to shop around rather than stop by your local bank branch.
It’s important to verify that an online bank (or, for that matter, a brick-and-mortar bank) is legitimate and that its deposits are federally-insured. Once you’ve done so, you can rest assured that your money is safe in an online bank CD.
Certificates of deposit are some of the safest investments available. They offer a guaranteed return on your money with no risk to your principal whether the CD is from a huge financial services institution or a small online provider. 
Online banks should offer the same protections for your CD as brick-and-mortar banks and sometimes better interest rates.

Securities and Exchange Commission. "Certificates of Deposit."
Federal Deposit Insurance Corp. "When a Bank Fails."
Federal Deposit Insurance Corp. "BankFind."
Federal Deposit Insurance Corporation. "Are My Deposit Accounts Insured by the FDIC?"
National Credit Union Administration. "Share Insurance Fund Overview."
Federal Deposit Insurance Corporation. "Deposit Insurance."
Federal Deposit Insurance Corporation. "How America Banks: Household Use of Banking and Financial Services, 2019 FDIC Survey," Page 4.
U.S. Securities and Exchange Commission. "Beware of Spoofed Websites Offering Phony Certificates of Deposit – Investor Alert."
U.S. Securities and Exchange Commission. "SEC Charges Additional Defendant in Phony Certificates of Deposit Scam."
https://banks.data.fdic.gov/bankfind-suite/bankfind
https://mapping.ncua.gov/ResearchCreditUnion.aspx
https://brokercheck.finra.org/
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Finance specialist with courses ranging from corporate finance, perfonal finance and startup finance. Msc. Acturail Science, Bsc. Finance, COP Insurance and phD. Business Advministration -FInance(ongoing)

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