In exchange for making a commitment to hold your CD for a specified period of time, the bank guarantees your interest rate for the duration of the term. The interest compounds, meaning it adds up over time and grows your principal at a fixed rate called the annual percentage yield (APY).ĬD rates are usually higher than high-yield savings account interest rates because banks and credit unions know how long they will have access to your money.ĬD accounts are designed assuming the financial institution will hold your money for a fixed period, and in return, they guarantee you a set interest rate for the duration of your certificate.

You deposit money into the CD and earn monthly interest.

Unlike investments tied to the stock market, the value of CDs does not decrease due to market fluctuations.Ī CD works similarly to a high-yield savings account offered by banks and credit unions. They are federally insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 at banks, and by the National Credit Union Administration (NCUA) at federal credit unions. However, keep in mind that withdrawing money from a CD before it matures will result in penalties that may eat into your earnings.Ĭertificates of deposit provide a secure way to save money. It’s important to consider factors like the minimum deposit required to open the account and any penalties for early withdrawal, as these can affect your earnings.ĬD terms typically range from three to sixty months, offering flexibility in choosing a term that suits your goals.īy depositing a higher amount or selecting a longer-term CD, you can often secure a better interest rate. The interest rate on a CD depends on the length of the term you choose.

During this time, you cannot withdraw the money without facing a penalty. When you deposit money into a CD, you agree to keep it there for a specific period of time, called the term. A certificate of deposit (CD) is a type of savings account offered by banks and credit unions that allows you to earn a fixed interest rate.

Peoples united bank cd rates