What is a Certificate of Deposit (CD)?

A Certificate of Deposit (CD) is indeed a savings vehicle characterized by a fixed interest rate and a fixed term. When an individual invests in a CD, they agree to deposit a set amount of money for a specified period, which can range from a few months to several years. During this time, the bank or financial institution offers a higher interest rate compared to a standard savings account, as the funds are locked in for the duration of the term. This makes CDs an attractive option for conservative investors or those looking to earn guaranteed returns without exposure to the volatility of the stock market. Additionally, since the interest rate is fixed, account holders know exactly how much they will earn by the end of the term, allowing for planning and budgeting with greater certainty.