Certificates of Deposit (CDs)

Certificates of deposit (CDs) are a type of savings account offered by banks and credit unions that typically offer higher interest rates than traditional savings accounts.

CDs require a fixed amount of money to be deposited for a specified period of time, ranging from a few months to several years, and in return, the bank or fixed rate of interest is paid by a bank or credit union.

The interest rate for a CD is usually higher than that of a savings account because the depositor is committing to leaving the funds in the account for the entire term of the CD.

Early withdrawal from a CD can result in penalties, such as the loss of earned interest or a portion of the principal. CDs are considered low-risk investments because they are insured by the Federal Deposit
Insurance Corporation (FDIC) up to a certain amount, currently set at $250,000 per depositor, per insured bank. CDs are often used to save for long-term goals, such as a down payment on a house or retirement.