Welcome to CDRates101.com
A CD or a Certificate of Deposit is time deposit provided by financial institutions such as banks or credit unions. A CD is similar to a savings account in the sense it is very low risk and your money is insured by the FDIC (Federal Deposit Insurance Corporation) for banks and the NCUA (National Credit Union Administration) for credit unions.
They differ because a CD typically has a fixed rate, and a fixed term which is usually 3 months, 6 months, 1 year, 2 years, 3 years or 5 years. Some financial institutions will have varying terms that differ from the normal.
A certificate of deposit is intended to be held until the account reaches its maturity, at which point the money and all accrued interest may be withdrawn. Often times penalties are accrued for early withdrawal of funds from a CD.
When you agree to let a bank or credit union hold your money for an agreed upon term this allows the financial institution to offer a better interest rate then you would get with an account in which money can be withdrawn on demand, like a savings account.
Typical Guidelines for CDs:
- In most cases a larger principle deposit will receive a better interest rate.
- Your interest rate will usually be higher with a longer term.
- Larger institutions usually offer lower rates than smaller ones.
