Certificate of Deposit

Definition

CD. Short- or medium-term, interest-bearing, FDIC-insured debt instrument offered by banks and savings and loans. CDs offer higher rates of return than most comparable investments, in exchange for tying up invested money for the duration of the certificate's maturity. Money removed before maturity is subject to a penalty. CDs are low risk, low return investments, and are also known as "time deposits", because the account holder has agreed to keep the money in the account for a specified amount of time, anywhere from three months to six years.

Use this term in a sentence

Many people invest in a Certificate of Deposit account since it bears low risk, but they could get a better return on investment if they were to select a different investment option.

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