Do not worry if you are not familiar with financial trends and term because it is easy to understand what is a certificate of deposit. The first thing that you have to know about certificate of deposit is that it’s an investment. It is a time deposit which means that you have to deposit and keep you money in the bank for a specific period. The term for it would range from six months up to five years in average. Because it is a time deposit, it restricts holders from withdrawing their money before the maturity date. Withdrawing the money is still possible, but if done before the agreed upon term the action will result to a penalty. On the other hand being able to keep the money safe in the bank up until the term agreed upon is fulfilled, will allow the holder to earn middle to high interest rates.
No need to doubt what is a certificate of deposit because the bank that you will transacting with is either covered by the Federal Department of Insurance Corporation also known as FDIC or if you are transacting with a credit union then it must be covered by National Credit Union Administration or NCUA, for a more secure investment.
Knowing what is a certificate of deposit will allow you to do two things to increase your money. You don’t only get to save your earned money in the bank; you also get to earn good amount of interest from it.