Retirement & Savings

What Is a Certificate of Deposit (CD)?

A certificate of deposit (CD) is a bank deposit that pays a fixed interest rate for a fixed term, such as six months or five years. In exchange for the fixed rate, the money generally must stay deposited until the CD matures; withdrawing early usually triggers a penalty, often a set number of months of interest.

CD Ladder

A CD ladder splits money across CDs with different maturity dates, so that part of the money becomes available at regular intervals.

Example

5,000 in a 12-month CD at 4.00% APY is worth about 5,200 at maturity. If withdrawn early with a penalty of three months' interest, roughly 50 of the earned interest would be forfeited.

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🔗 Related Terms

Savings Account Early Withdrawal Penalty APY (Annual Percentage Yield) High-Yield Savings Account

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.