Certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time and during that time, the account accrues interest, which the issuing bank pays out. The lump sum deposited must be in the account for the allotted time, which is predetermined when deposited. The interest rate is dependent on the bank’s savings and money market product, and the penalties that apply for a premature withdrawal.
[Last updated in June of 2021 by the Wex Definitions Team]