A certificate of deposit, known as a C.D., is a type of deposit available from various financial institutions. A C.D. requires that you deposit a sum of money for a guaranteed period of time. If you withdraw the money prematurely, you will be charged a penalty. In exchange for your deposit, the financial institution will pay a fixed rate of interest for the specified period of time. This interest rate is usually higher than that paid on a savings account. You may choose from either short or long-term C.D.s, depending on how long you are willing to leave the money in the account. Generally, the longer the investment period for the C.D., the higher the interest rate will be. If you are considering a C.D., compare rates among financial institutions to get the best interest possible. Also, look for a C.D. that is federally insured. These C.D.s are guaranteed by the government for up to one hundred thousand dollars in case the financial institution collapses. For more information about certificates of deposit, contact a financial advisor.
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