Certificate of Deposit (CD)

A bank deposit locked for a fixed term at a fixed interest rate.

A CD pays a guaranteed interest rate in exchange for leaving money untouched for a set term, from months to years. Early withdrawal usually incurs a penalty. CDs are insured up to limits and offer higher rates than savings accounts in return for reduced liquidity.

She locked her savings in a one-year Certificate of Deposit (CD) for a higher rate, accepting a penalty for early withdrawal.