Certificate of Deposit: The Facts

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One of the safest investments you can make is in a certificate of deposit, or CD. There are several things to remember when searching for the best certificate of deposit for your funds.
Read more below.

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Certificate of Deposit Facts

  • A certificate of deposit (CD) is a special type of deposit account that is held for a stated period of time. CDs generally offer a higher rate of interest than a regular savings account.
  • A fixed rate of interest is paid on the Certificate of Deposit, usually at regular intervals.
  • Certificates of Deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor per insured institution, or up to $500,000 per joint account per insured institution.
  • Banks are allowed to charge a penalty for early withdrawal of the deposit. These penalties may vary widely from bank to bank.
  • A certificate of deposit is generally a low-risk investment while other investments, such as stocks, can be more volatile and are not FDIC-insured.
  • Once the Certificate of Deposit has reached maturity (meaning the agreed-upon length of the CD has come to an end), the depositor has the option of withdrawing the money or "rolling it over" into a new CD, allowing the interest earned to compound further.

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