Certificate of Deposit (CDs) - Meaning, Features & Benefits (2024)

FAQs

What are the features of certificate of deposit CD? ›

A CD, or certificate of deposit, is a type of savings account with a fixed interest rate that's usually higher than the rate for a regular savings account. A CD also has a fixed term length and a fixed withdrawal date, known as the maturity date.

One key benefit of a CD is that it's typically a safe way to increase your savings rate of return. If you're skittish about the stock market or tying up money in bonds, you might appreciate the security of a certificate of deposit. The FDIC insures CDs up to the maximum amount regulated by law.

Certificates of deposit (CDs) are bank deposit products that hold your funds for a set period of time, or term. In exchange, the bank pays you a fixed annual percentage yield (APY), making CDs a safe, reliable way to grow your money.

DEA Controlled Dangerous Substances (CDS)

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With a CD, you agree to leave your money in the account for a set period of time, which can range from a few months to a number of years. In exchange, the bank or credit union that issues your CD will pay you a guaranteed return on the money, typically higher than you'd get on a regular savings account.

CDs offer higher interest rates than traditional savings accounts, guaranteed returns and a safe place to keep your money. But it can be costly to withdraw funds early, and CDs have less long-term earning potential than certain other investments.

For some people, it can be worth putting money into a CD. If a person is seeking a riskless investment with a modest return, CDs are a good bet—you'll earn a higher rate than you would with a checking or savings account, but you'll have to commit your funds for a fixed period.

That all said, here's how much a $1,000 CD will make in a year, based on four possible interest rate scenarios: At 6.00%: $60 (for a total of $1,060 total after one year) At 5.75%: $57.50 (for a total of $1,057.50 total after one year)

How much does a $5000 CD make in a year? ›

How much interest would you make on a $5,000 CD? We estimate that a $5,000 CD deposit can make roughly $25 to $275 in interest after one year. In comparison, a $10,000 CD deposit makes around $50 to $550 in interest after a year, depending on the bank.

CD rates are usually quoted as an APY, and banks and credit unions usually compound interest daily or monthly.

Safety. Along with savings accounts and money market accounts, CDs are some of the safest places to keep your money. That's because money held in a CD is insured. So long as you purchase your CD account through an FDIC-insured bank, you're covered in case the bank shuts down or goes out of business.

Because CD account holders can't take their money back at a moment's notice like savings account holders can, CDs are more valuable to banks than savings deposits. Banks typically pay CD investors a higher yield in exchange for locking up their money for a set term.

Expert-Verified Answer. The interest rate on a CD, or certificate of deposit, is fixed and typically greater than the interest rate on a regular savings account. Additionally, it has a predetermined term end date and a predetermined withdrawal date, or maturity date.

Featured CDs generally offer higher APYs than the standard CDs offered by Bank of America. Here's a closer look at the CDs Bank of America has to offer. Account. Term.

Compared to stocks or other securities, CDs are a relatively safe investment since your money is held at a bank. The biggest risk to CD accounts is usually an interest-rate risk, as federal rate cuts could lead banks to pay out less to savers. 7 Bank failure is also a risk, though this is a rarity.