Certificate of Deposit Account

Certificate of Deposit Account Meaning:
In U.S. deposit terminology, the term Certificate of Deposit Account refers to a depository savings account opened at a financial institution or bank. Certificate of Deposit Accounts generally pay out a higher interest rate than normal savings accounts.

Certificate of Deposit Account Example:

For example, a Certificate of Deposit Account differs from a normal savings account in that they generally pay out a fixed rate of interest, versus a variable rate which is offered on normal savings account. Certificates of Deposits held in the account, normally have a specific and fixed term that is generally between one month and up to ten years. Due to the commitment of funds the depositor is willing to make in allowing the bank or financial institution the use of their money for a fixed period, the bank or financial institution will usually pay a higher rate of interest than on demand deposit accounts where withdrawals can be made without penalty.