Certificate of Deposit (CD)

A federally insured time deposit that pays a higher rate in exchange for leaving the money untouched until the term ends.

Terms run from about a month to five years, and early withdrawal carries a penalty. The term, not the rate, is what decides whether a CD fits a goal.

Higher rate, longer lock.

Often confused with

Savings Account: A CD locks the money for a set term; a savings account lets you withdraw whenever you like.

Taught in

3.1 Saving for Future Purchases

See also

3.1.C.2 · 3.1.C.6