Mint Money Knowledge Center: What is a certificate of deposit?

Banks and credit unions have many different investment products for consumers to choose from that all serve different purposes. Savings accounts are places to put cash that you can access quickly and easily, but savings accounts do not generally have high interest rates. If you are looking for a safe investment that pays interest, then consider a certificate of deposit. What is a certificate of deposit


What Is A Certificate Of Deposit?

A certificate of deposit (CD) is an investment that has a guaranteed interest rate and a pre-determined maturity rate. The maturity rate is how long you have to keep your money in the CD in order to collect the interest. If you leave the money in a CD until it matures, then you collect your principal plus the interest. If you withdraw your CD money early, then you must pay a penalty and you may or may not get your interest.

A Protected Investment

On average, a CD will pay a higher interest rate than a savings account, which is one thing that makes these investments so popular. Another reason consumers like using CDs is because the money put into a CD is protected by the federal government. Even if the bank you bought the CD from is shut down, the federal government can still help you to recover your initial investment up to $250,000.

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