The term of a Certificate of Deposit generally ranges from one month to five years. A CD restricts withdrawals by the holder prior to its maturity date, which typically ranges from one month to five years.

A certificate of deposit (CD) is the best way to save money and earn a higher interest rate compared to other money market investments. One has to note that CD’S are not liquid and your funds are locked for a particular period of time. You will loose interest, if you try to withdraw early.

Mainly, in a CD, you are promised your principal plus a fixed amount of interest, which you receive periodically throughout the time period. Once the period expires, you can then cash out the principle and the interest or move the CD for another following period.

Normally, it is not advisable to buy a CD with a period of more than five years. The situation with regard to the interest rate could change drastically during that time and thus you could get held up with a long period, low rate type CD. You can purchase CD’S for various duration. The most popular are between three months and five years.

CD interest rates are sometimes linked to the stock market or bond market. Since CD’S involve money that is invested for a fixed period of time, they (CD’S) usually earn higher interest rates than savings accounts.

Before investing in a CD, you must first decide on certain things like, the duration of the CD, how much you would like to invest, and what you’d like to do with the interest earned. The interest earned may be either reinvested or distributed to you when earned.

You must be in a position to anticipate whether the present interest rate will be rising or falling. You can use your money for a short term CD, if you think that interest rates will go up. You can keep the money for a stipulated period until you reach a point where they are high enough to represent an attractive return for you. Once you reach this stage, you can then switch to a longer CD term investment.

Withdrawing funds from a CD before maturity typically incurs a substantial penalty, such as six months interest for a five-year CD. It is not advisable to the CD holder to withdraw money before maturity unless there is a good reason. By investing your money in CD’S, you are letting the bank to use your money for that specific amount of time. If you decide to withdraw money before the time period is over, the bank charges you a fee in the form of a penalty. CD’S can act as a good investment vehicle for people of all ages. If you have a lot of pending money in saving accounts, then in that case you can wisely invest in a CD. CD’S are insured based on the FDIC (Federal Deposit Insurance Corporation) and NCUA (National Credit Union Administration), guidelines. A single account can cover up to $100,000 and joint accounts are covered up to $200,000.

A certificate of deposit aka high CD rates or so called, “time deposit”, in USA, is a familiar product, commonly offered to consumers by banks and Credit Unions. Such CD’S are similar to savings accounts and are being insured by the FDIC for banks or by the NCUA, for Credit Unions and thus is virtually risk free. They are different from savings accounts. CD involves a specific, fixed term-often three months, six months or one to five years and usually at a fixed interest rate. In the case of a CD investment, the money is held until maturity and then on the maturity date, the money may be withdrawn together with the earned interest.