Certificate of Deposit CD
Definition of 'Certificate of Deposit CD'
A certificate of Deposit or CD is a time deposit. This is a financial product commonly offered to consumers by banks, thrift institutions, and credit unions.
CDs are similar to savings accounts in that they are insured and therefore close to risk-free. CDs are insured by the FDIC for banks or by the NCUA for credit unions.
The main difference between a CD and a savings account is that you can typically withdraw your money from a savings account at any time whereas with a CD you only get your money (plus interest) back when the CD matures. The CD will have a specific, fixed term which is usually one of:
- three months
- six months
- one year
- two years
- three years
- four years
- five years
In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand.
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