Certificates of Deposits (CDs) Key Terms

Explore the benefits and options of certificates of deposit by learning industry terminology

By Christine Foley

Certificates of deposit, also referred to as CDs, are a virtually risk- free method through which businesses and individuals may be able to store extra money and generate high-interest on the amount over time. While certificates of deposit sound simple enough to understand and easy enough to implement, it is important that individuals and businesses understand exactly what they are getting into when it comes to using a certificate of deposit. This is the case with any investment being made. To assist in learning the specifics of certificates of deposit, learn key terms and concepts related to the field.

Interest rates

Interest rates refer to the amount of money paid for the borrowing or the securing of money. While interest rates are owed by borrowers for loans, mortgages and credit card bills, when it comes to certificates of deposit, interest rates illustrate the percentage of funds the individual or business will be able to earn as a result of storing an amount of funds with a particular financial establishment.
Try: For basics on certificates of deposit, including how some interest rates are determined, visit INGDirect.com.

Money market account

A money market account is a specific form of a deposit account. These accounts are typically categorized as having a relatively high rate of interest with short-to-no notice being needed for withdrawals. Money market accounts offer a style of immediate access deposit. They may be subject to federal savings account regulations, which are likely to include a monthly transaction limit.
Try: To learn the details of how money market accounts work, visit HowStuffWorks.com.

Call features

Callable CDs, or those which offer call features, may allow the bank issuer to call the certificate of deposit. On specific and predetermined dates, certificates of deposit with call features may be called upon for the bank to give the individual or organization his or her money back and then cancel the certificate of deposit. However, it is important to note that the call features do not allow the individual or organization who put money into the CD to redeem it.
Try: For extended information on call features of certificates of deposits, visit InCapital.com.

Maturity

Also known as the holding period, this is the amount of time the money needs to sit before the depositor is able to get his or her principal amount back. In addition to the principal amount, the maturity of a CD will also potentially offer additional funds in the form of interest.
Try: Investopedia.com offers additional information on the maturity date of a certificate of deposit.

Liquid certificates of deposit

Liquid certificates of deposit are fixed-interest savings vehicles. They are guaranteed for a specific and predetermined length of time. During the time the funds are tied up in the liquid CDs, clients are able to make withdrawals, meaning the money does not need to remain untouched in the CD account.
Try: Liquid certificates of deposit are illustrated in detail at FirstRepublic.com. This site also expresses what individuals may want to consider when it comes to liquid CDs as well as what liquid CDs have to offer investors.

Strategies

Strategies may be employed in order to make the most of certificates of deposit. These are managerial tactics utilized to increase the benefits of CDs.
Try: Various certificate of deposit strategies are explored at BankRate.com.