Certificate of Deposit (CD)

A Certificate of Deposit is a savings certificate with a specific fixed term and entitles the receiver to accrue interest.

  • Predictable returns

    Fixed rates mean the return is known
  • Lower risk

    CDs are insured in the bank and backed by the FDIC.
  • Safe investment

    CDs are considered one of the safest investments.

What is a CD Account?

A Certificate of Deposit, commonly referred to as a CD, is a means of investing at a fixed interest rate and fixed withdrawal date.

Banks offer certificates of deposit as promissory notes where, unlike a regular savings account, the investor agrees to leave his/her money in the account until the maturity date. Investors are usually unable to withdraw their investment before the maturity date without paying a penalty fee.

The investor can opt for a higher interest rate by choosing a longer-length term. The interest rates for a CD investment are fixed, meaning it will remain the same amount until the maturity date. When the CD matures, the entire principal investment, as well as the interest will be available to the investor for withdrawal. CDs offer higher interest rates than accounts that allow you to withdraw at any time.

CDs are low risk because, like savings accounts, CDs are insured in the bank and your principal is backed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. This is what makes Certificates of Deposits one of the safest investments available.

Navigation Tip:

Almost all financial institutions offer some type of CD, but they each get to set their own rates and terms. It’s important to shop your options to find the best one.

Types of CDs

How to Invest in CDs

Investors are encouraged to do adequate research or contact a broker/financial advisor, attorney or CPA, to determine if CDs are an appropriate investment.

Once you have determined that a Certificate of Deposit is suitable for you, it can be purchased with your Self-Directed IRA or other retirement account at Mainstar Trust. Click below to find out how to use a Mainstar Trust account to invest in a CD.