Certificate of deposit

A certificate of deposit (CD) is a monetary option offered by banks where a client can put an amount of money into a certicate that is then tied up for the length of the contract at a set rate of return. Often a minimum amount is required, often $1,000 (though sometimes as little as $500 can be deposited).

Generally speaking, the longer the contract term and/or the more deposited, the greater the interest rate offered.

Any attempt to take money out of the certificate of deposit before its expiration date would result in a monetary penalty, usually a forfeiture of a portion of the amount earned. However, in most cases the penalty can be deducted from taxable income.

See also

• Savings account: Inflation versus Interest rates