Certificate of Deposit
Bank Certificate of Deposit
A time deposit offered by banks with fixed terms and guaranteed principal and interest payments.
Certificates of deposit provide guaranteed returns with FDIC insurance protection up to applicable limits, making them very safe investments. Banks offer various CD terms from weeks to several years, typically with higher rates for longer commitments. Early withdrawal usually incurs penalties, making CDs suitable for funds not needed during the term. Jumbo CDs require large minimum deposits and may offer higher rates. Brokered CDs sold through investment firms provide access to CDs from multiple banks and secondary market liquidity. Variable rate and callable CDs offer different risk/return profiles. CDs compete with Treasury securities and money market accounts for conservative investors seeking principal protection and predictable returns.
Example
12-month CD at 4.5% APY, 5-year jumbo CD requiring $100,000 minimum