Certificate of Deposit (CD)
A CD is a bank product which is a secure investment with a fixed interest rate deposited for a period of time. The money used to purchase the CD acts like a loan to the bank. During that time, the money will then earn interest until a predetermined date.
A CD is a financial product often offered by banks or credit unions to consumers in America. Similar to a savings account, a certificate of deposit is insured and offers essentially no risk to the investor. CDs usually come with a fixed interest rate as well as a specific allotted term, ranging anywhere from a few months to a few years. When the predetermined term has run out, the money can be withdrawn along with the accumulated interest. If the money is removed before the CD has hit maturity, it is subject to a penalty. The penalty will be determined depending on the size and lifetime of the CD. Institutions that offer CDs often grant higher interest rates with these accounts than regular savings accounts in return for not withdrawing assets until the prearranged date. When purchasing a CD, a minimum deposit is often required. The larger the deposit is, the higher the rates may be