What is a Certificate of Deposit?

A Certificate of Deposit, commonly referred to as a CD, is a financial product that essentially pays risk-free interest (though typically at very low rates).

CDs are typically offered by banks and credit unions, and usually span in duration from one month to 5 or 10 years. They are FDIC guaranteed up to $250,000, so customers may generally consider them risk-free. But because there is very little risk to purchasing a CD, they also typically pay very low annual interest rates.

In the years following the 2008 financial crisis, when global interest rates were cut to near zero in most developed countries, CDs almost unanimously paid less than 1-2%.

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