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Certificate of Deposit

Sofia KazmiSofia Kazmi subscriber Posts: 20 Bronze Level Member

A certificate of deposit is a savings certificate with fixed maturity dates & specified fixed interest rates.

These are the safe investment available from bank & credit union. It can be issued in any denomination aside from minimum investment requirements. A Certificate of Deposit restricts access to the funds until the maturity date of the investment. (The maturity date is the date on which the principal amount of a note, draft or acceptance becomes due and is repaid to the investor.)

The bank agrees to pay more interest rate than the savings account because they can use this money for a long-term basis. The common long terms available are 6, 12, 18 & 60 months although one can choose other terms as well.

Thought long terms are better, but if one pulls their money before the maturity date, they have to pay a penalty. So, it is better to deposit when you are completely sure you won’t need the money until the maturity period.

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