A bank CD is called a certificate of deposit and it's a financial product offered by banks to investors. Bank CD's are low risk investments that can be converted into cash over a specified period of time. Credit unions, banks, and financial thrift institutions normally issue bank CD's.

Time Limit

Consumers purchase bank CD's for a fixed period of time that can be anywhere from 3 months to 20 or more years depending on the terms set by a particular institution.

Deposit Amounts

There isn't a set standard for CD deposit amounts within the banking industry and these amounts will vary by institution. Some organizations offer CDs as little as $100 and others offer them for up to $100,000.

Interest

Each certificate note issued to an investor will accrue interest. Interest rates usually range from 1 percent to 2.5 percent. Keep in mind that this rate may vary significantly by institution. Generally, the longer the term of the CD, the higher the interest rate.

Early Withdrawal

Banks use the money that an investor has deposited in a CD to carry out their business functions. When an investor cashes in their CD before the term ends then the bank will penalize the investor with a loss of interest and/or a loss of cash value from their initial investment.

Features

Banks issue CD's with many different features. Some include high interest rates and others have short term commitments. The FDIC insures CD's up to 100,000. There are many different kinds of CD's and each offers some unique feature for the benefit of the investor.

Source:

US Securities and Exchange Commission

Investorwords

Investopedia

Resource:

Money Rates