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What is a Certificate of Deposit (CD)?

What is a Certificate of Deposit (CD)? Blog image
Affinity FCU Blog
By: AffinityFCU

Key takeaways

  • A CD is a savings product through which you can earn interest on your deposit for a fixed period of time.
  • Removing funds from the CD before the fixed period of time ends could result in penalties, including the loss of earned interest.
  • Look for CDs with the highest annual percentage yield (APY) to maximize your returns.

A certificate of deposit (CD) is a deposit account that generates interest on the amount deposited. Credit unions, including Affinity, offer similar products known as certificates. The description of CDs below also applies to credit union certificates.

Most CDs require $500 or more as a minimum deposit amount. Here’s how a CD works:

  • You open a CD with at least the minimum deposit amount, and you agree to leave the money in the CD for a fixed period of time. That period of time is known as the CD term.
  • CD terms can range from a few weeks to 10 years or more.
  • Longer terms often mean higher annual percentage yields (APYs), and higher APYs mean more earned interest!
  • To earn this interest, the CD account holder must leave the money in the CD for the entire term. The day the term ends is known as the maturity date. On that date, you can:

1. Put the money into a new CD.

2. Let the CD renew.

3. Cash in the CD, which will include your earned interest.

Be Sure You Won’t Need the CD Money Until the End of the Term

CDs are considered to be one of the safest savings options, especially since they are low-risk accounts that are insured by the FDIC for up to $250,000. BUT, you must be sure you won’t need the money until the end of the CD term. If you withdraw money from the CD before the maturity date, you can trigger an early withdrawal penalty. Banks and credit unions have different penalties in place, but generally speaking, the early withdrawal penalty can be a flat fee, a percentage of interest earned, or worst of all, you could lose all the interest earned.

That’s why you should always read the fine print on the CD account terms before opening one. In the meantime, you can learn more about CDs at

Remember, Credit Unions Offer Certificates, Which are Like CDs

As mentioned earlier, credit unions like Affinity offer certificates, which function like CDs and offer similar levels of safety and security. Certificates are insured up to $250,000, by the National Credit Union Share Insurance Fund.

Affinity certificates could be a great addition to your financial portfolio. We invite you to learn more about our certificates and open an account today!