What Is a Certificate of Deposit?
Type of savings account offered by banks and credit unions
When it comes to saving money, there are many options available. One such option that often gets attention is the Certificate of Deposit, or CD for short. But what exactly is a Certificate of Deposit, and how does it work? Let’s dive into this financial tool to uncover its ins and outs.
What is a Certificate of Deposit (CD)?
A Certificate of Deposit is a type of savings account offered by banks and credit unions. It’s a safe and secure way to save money while earning a fixed interest rate over a specified period of time.
How Does it Work?
When you open a CD, you agree to deposit a certain amount of money for a predetermined period, known as the term or maturity period. This period can range from a few months to several years. During this time, your money earns interest at a fixed rate, which is typically higher than that of a regular savings account.
Key Features
1. Fixed Interest Rate: Unlike some other savings accounts, the interest rate on a CD remains constant throughout the term.
2. Maturity Date: At the end of the term, known as the maturity date, you can withdraw your initial deposit plus any accrued…
