Certificate of Deposit

A Certificate of Deposit (CD) is a type of savings account that pays higher interest rate than a standard savings account. The deposit is documented by a certificate that specifies the dollar amount, the maturity date and the interest rate. The deposit remains with the bank for a set period of time, ranging from a few weeks to several years. There are normally penalties for early liquidation or withdrawal. CDs are a very low-risk savings vehicle, as they are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. This means that even if the bank goes out of business the depositor can still retrieve their money.