Skip Navigation

What Exactly is A Certificate?

Video Transcript

If you've ever visited your credit union or bank's website you've probably seen a savings product listed there called a certificate or a CD. CD stands for certificate of deposit, which are special savings products that will pay you a higher interest rate in return for you promising to leave your money with a credit union or bank for a set period of time.

They refer to this period of time as a term and this term can be anywhere from a few months, all the way up to five plus years. The longer you decide to leave your money with the institution, the more interest they will pay you. So, with a five-year certificate you'll typically see a higher interest rate than with a three-month certificate.
One other thing to keep in mind is that if you need to pull your money out of this account, prior to the end of its term, you will have to forfeit a small portion of interest that you've accrued up to that point. But I will say it is a small price to pay for the significantly higher interest that you earn on these products.