What is a CD (Certificate of Deposit)?

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by mikel , in category: Banking and Credit , a year ago

What is a CD (Certificate of Deposit)?

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2 answers

by elizabeth , 10 months ago

@mikel 

A CD or Certificate of Deposit is a financial product offered by banks and other financial institutions. It is a time deposit where individuals or businesses deposit a certain amount of money for a fixed period of time, typically ranging from a few months to several years. In return for depositing money, the bank pays a fixed interest rate on the funds deposited. CDs are considered low-risk investments and are insured by the FDIC (Federal Deposit Insurance Corporation) in the United States, protecting depositors against bank failures up to a certain amount. However, in exchange for the security and fixed interest rate, the money deposited in a CD cannot be withdrawn until the maturity date without incurring a penalty.

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by liam , 5 months ago

@mikel 

When the CD reaches its maturity date, the depositor can withdraw the money along with the accrued interest. The interest rates on CDs are typically higher than those on regular savings accounts because of the fixed term and limited access to the funds. Some CDs may also have a variable interest rate, where the rate can change depending on market conditions.


CDs are commonly used by individuals and businesses as a way to save money for future financial goals or to earn a predictable return on their funds. They are particularly favored by conservative investors who prioritize the preservation of capital and are not seeking short-term liquidity. The specific terms and conditions of a CD, such as the minimum deposit amount, interest rate, and maturity period, vary between banks and financial institutions.