What is a certificate of deposit (CD)?
Answer: A Certificate Deposit, or CD, is a special type of savings account offered by banks or credit unions. You generally must keep your funds in the CD for a specified period of time to avoid penalties.
A CD is also called a “time deposit.” The end of that time period is called the “maturity date.” The size of the penalty you will pay if you remove money from a CD before the maturity date will vary. You can find out what the penalty is before you purchase a CD. Some institutions may agree in advance to waive the penalty for withdrawing the money from the CD before its maturity date if you have held the CD for a minimum period of time. CDs offered by banks are insured (up to $250,000) by the Federal Deposit Insurance Corporation (FDIC), while those offered by credit unions are insured up to $250,000 by the National Credit Union Administration (NCUA).