Certificate of Deposit

Certificate of deposit is a savings certificate that entitles the bearer to receive interest. Such certificates are insured, thus making them risk free. They have a fixed interest rate and a maturity date. They differ from savings account in the fact that they are specific and are fixed term. Such certificates are mainly for three months, six months or even one to five years. They have a fixed interest rate and must be held until maturity, after which it is withdrawn along with the accursed interest. A penalty is imposed if an individual withdraws the amount on demand. The term ‘small CDs’ is used for certificate of deposit less than $10,000, CDs more than $100,000 are termed as ‘jumbo CDs’ or ‘large CDs’. There are also a few guidelines for determining rates like a long term or a larger principle receives a high rate of interest. Also, small institutions generally offer a high interest rate than the larger ones.

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Edited and Updated 31st May 2014

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