What is Certificate Of Deposit?

A CD which is short for certificate of deposit is often the popular choice by people because it bears interest at a very fixed rate which ensures more security. The amount of time that a certificate of deposit can be purchased is usually 1 month to about 5 years. The CD or certificate of deposit is also insured by the FDIC and issued only by commercial banks. This once again ensures more security for the person that is obtaining it.

A certificate of deposit boils down to what is known as a promissory note. This means you are giving the bank this money which they may use to make a profit obviously and then return the money back to you once the term has been served. A certificate of deposit however can be broken, and money asked back before the due date, but this will incur a penalty so it is not the wisest choice. If you want to know more about the best cd rates and sizes of a certificate of deposit, the next article will cover this.