<Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> <P> A certificate of deposit (CD) is a time deposit, a financial product commonly sold in the United States and elsewhere by banks, thrift institutions, and credit unions . </P> <P> CDs are similar to savings accounts in that they are insured "money in the bank" and thus virtually risk free . In the USA, CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions . They differ from savings accounts in that the CD has a specific, fixed term (often one, three, or six months, or one to five years) and, usually, a fixed interest rate . The bank intends that the customer hold the CD until maturity, at which time they can withdraw the money and accrued interest . </P> <P> In exchange for the customer depositing the money for an agreed term, institutions usually grant higher interest rates than they do on accounts that customers can withdraw from on demand--though this may not be the case in an inverted yield curve situation . Fixed rates are common, but some institutions offer CDs with various forms of variable rates . For example, in mid-2004, interest rates were expected to rise--and many banks and credit unions began to offer CDs with a "bump - up" feature . These allow for a single readjustment of the interest rate, at a time of the consumer's choosing, during the term of the CD . Sometimes, financial institutions introduce CDs indexed to the stock market, bond market, or other indices . </P>

What are certificate of deposits and how do they work
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