Certificate of Deposit (CD)


A certificate of deposit (CD) is a bank investment product that pays a determined amount after a period of years. A person can purchase a certificate of deposit and cash the CD one, five or even 10 years later. The interest rate paid on certificates of deposit ultimately depends upon the bank and the market place. Banks will pay more on longer CDs since the CD purchaser gives the bank the ability to use his money for a longer term. In most cases, a one-year CD will only bring back a return of around one percent. A person taking a 10-year CD might get a bump of a couple percentage points. A certificate of deposit is a very good product for people who want absolute safety in their investments. However, it is not a great way to grow money quickly. Instead, it is used more like a savings vehicle where people can put their money in with absolute knowledge that they will get it back with some growth.
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