Certificates of Deposit, commonly called CDs, are financial products that work a little like a savings account but with significantly higher interest rates.
When you invest in a CD, you are agreeing to deposit money for a set amount of time. During that time, you cannot take money out. It will remain in your account throughout the agreed upon time period.
Typically, the longer the investment, the more you earn in interest. Terms can range from months to years and you’ll select the time period before depositing your money.
Although other financial investments like stocks tend to have better returns, they come with higher risk. CDs are a conservative way to invest your money. Here are a few other pros and cons to consider before investing.