Certificate Of Deposit - CD

AAA

DEFINITION of 'Certificate Of Deposit - CD'

A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC. The term of a CD generally ranges from one month to five years.

INVESTOPEDIA EXPLAINS 'Certificate Of Deposit - CD'

A certificate of deposit is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. Although it is still possible to withdraw the money, this action will often incur a penalty.

For example, let's say that you purchase a $10,000 CD with an interest rate of 5% compounded annually and a term of one year. At year's end, the CD will have grown to $10,500 ($10,000 * 1.05).

CDs of less than $100,000 are called "small CDs"; CDs for more than $100,000 are called "large CDs" or "jumbo CDs". Almost all large CDs, as well as some small CDs, are negotiable.

Want to know more? Read our tutorial Certificates Of Deposit: Introduction

VIDEO

RELATED TERMS
  1. Window Guaranteed Investment Contract

    A type of investment plan where a series of payments are made ...
  2. Money On The Sidelines

    The cash that is held either in savings or in low-risk, low-yield ...
  3. CD Ladder

    A strategy in which an investor divides the amount of money to ...
  4. Current Account, Savings Account ...

    CASA accounts are most prominent in middle and southeast Asia, ...
  5. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank ...
  6. Jumbo CD

    A certificate of deposit (CD) with a minimum denomination of ...
RELATED FAQS
  1. What is the safest investment?

    Learn about some of the safest investment types. Find out which investment categories offer the best protection on your principal ...
  2. How are yields taxed on a certificate of deposit (CD)?

    Learn how interest earned on a certificate of deposit is taxed and how this may reduce the total return of an investment ...
  3. What is considered a good interest rate for a certificate of deposit (CD)?

    Explore the various options available with certificates of deposit and discover how to find the most lucrative rates for ...
  4. What are the typical durations for a certificate of deposit?

    Investing in a certificate of deposit offers individuals the ability to earn interest on idle funds with less risk than stock ...
  5. How safe an investment is a certificate of deposit?

    Discover certificates of deposit, their basic makeup and numerous variations, and understand why they are some of the safest ...
  6. What are some examples of the most common types of investments on an IRA?

    Explore different investments commonly held in investment retirement accounts, such as certificates of deposit and exchange ...
  7. Are certificates of deposit a kind of bond?

    There is a fair amount of overlap between certificates of deposit (CDs) and bonds; they are both fixed-income securities, ...
Related Articles
  1. Savings

    Certificate of Deposit (CD)

    A certificate of deposit, or CD, is a common financial product sold by banks, thrift organizations and credit unions. This type of product is often called a time deposit. CDs are insured up to ...
  2. Bonds & Fixed Income

    Certificates Of Deposit

    Safety is a hallmark of the traditional certificate of deposit (CD) sold by a bank or credit union.
  3. Bonds & Fixed Income

    Ultrashort Bond Funds: More Risk Than Reward?

    These funds' risk may overshadow their returns. Find out all you need to know before you get involved.
  4. Fundamental Analysis

    6 Ways To Improve Your Portfolio Returns Today

    These historically tested methods will improve your investment results.
  5. Insurance

    How To Create A Laddered CD Portfolio

    Laddered certificates of deposit offer safe capital and predictable cash flow, while bringing simplicity to your portfolio.
  6. Personal Finance

    Get A Short-Term Advantage In The Money Market

    This investment vehicle is often the perfect stop-gap measure for growing your money.
  7. Retirement

    Index-Linked Certificates Of Deposit: Upside Potential, Low Risk

    Index-linked CDs generate returns similar to indexes, without the potential for loss.
  8. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  9. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.
  10. Investing

    Strategies To Position Your Bond Portfolio

    Fixed income investors may not be able to see them all right now, but important trends are stirring on the investment horizon.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center