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MIAMI A
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LSDefine
Simple English definitions for legal terms
certificate of deposit
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A quick definition of certificate of deposit:
A certificate of deposit is a piece of paper from a bank that says you gave them some money and they promise to give it back to you later. They also promise to pay you some extra money called interest for letting them keep your money for a certain amount of time.
A more thorough explanation:
A certificate of deposit (CD) is a document issued by a bank that acknowledges the receipt of money from a depositor and promises to repay the amount with interest at a later date.
For example, if you deposit $1,000 in a CD with a term of one year and an interest rate of 2%, the bank will issue you a certificate of deposit that shows your deposit amount, the term of the CD, and the interest rate. At the end of the term, the bank will return your $1,000 plus $20 in interest.
Certificates of deposit are a low-risk investment option that offer higher interest rates than savings accounts. However, they typically require a minimum deposit and have penalties for early withdrawal.