Certificate of Deposit (CD)

A certificate of deposit (CD) is a time-locked bank deposit: you commit a sum for a fixed term — commonly 6 months to 5 years — and the bank pays a guaranteed rate, usually higher than ordinary savings, in exchange for the commitment. At maturity you receive principal plus interest; withdraw early and a penalty (often several months of interest) claws back part of the earnings.

CDs sit at the safest end of the investment spectrum: FDIC insurance covers up to $250,000 per depositor per bank (NCUA equivalently at credit unions), making the return effectively risk-free within limits. The price of that safety is the lock and a return that only modestly beats inflation in good years.

Where CDs genuinely shine: money with a known date — a house down payment eighteen months out, tuition due in two years — where rate certainty matters and access before the date isn’t needed. The CD ladder extends the idea for ongoing savings: stagger several CDs so one matures every year, capturing long-term rates while keeping annual liquidity.

Compare offers strictly by APY, watch the auto-renewal window at maturity, and price any candidate CD — value at maturity, interest earned, effective yield — in the CD calculator.