skip to Main Content

What is a CD Account and How Does it Work?

You’ve probably heard of a CD account before but you don’t really know what it is.  A CD account, also called a certificate of deposit account, is a loan that you make to a bank for a fixed amount of time.  Certificate of Deposit accounts are known to be one of the safest investment vehicles.  In return for your loan, a bank will give you interest on your loan.  That is where the term CD account comes from,  you get a certificate of deposit once you agree to loan the bank the money.  The interest rate of CD accounts increase with the amount of time you agree to loan the bank.  The interest rates of CD accounts are usually higher than the interest you will receive from your checking or savings account.  Most CD accounts have terms from 3 months to up to 10 years and are insured by the FDIC up to $250,000.  Along with having your money in a CD account longer for higher interest rates, you can also choose to put more money in your CD account to receive higher interest rates.

keep reading
Back To Top
Join Our Community of Wealth Builders
Sign Up for our FREE Newsletter!
We respect your privacy.