Definitions

Certificate of Deposit (CD)

A CD is a savings certificate entitling the bearer to receive interest. A CD bears a maturity date and a specified fixed interest rate, and can be issued in any denomination. Commercial banks generally issue CDs. In the United States, the FDIC insures eligible CDs held at FDIC-insured banks. In Canada, the CDIC insures eligible term deposits such as GICs issued by member institutions, subject to its coverage rules. The term of a CD generally ranges from one month to five years.

A CD is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. Although it is still possible to withdraw the money, this action will often incur a penalty.