What Is a Certificate of Deposit (CD)?

By Matthew Frankel, CFP – Updated Sep 5, 2025 at 2:48 AM

Key Points

CDs offer higher interest rates than savings accounts if you can lock in money for set periods.
Creating a CD ladder allows flexible access while benefiting from long-term rates.
CDs are insured by FDIC, securing investments up to $250,000 per institution.

There are several different places where you can put your cash. A checking account can be great for paying bills and everyday living expenses, but it generally won't earn you much interest, if any. Then there's a savings account, which can earn you quite a bit more interest, but there's no guarantee that the interest rate will remain attractive.

A certificate of deposit, or CD, is a type of account that can allow savers to lock in a specific interest rate for a certain time and can be a great solution if you're looking to maximize the returns from your rainy-day cash. In this article, we'll look at exactly what a CD is, whether it might be right for you, and how you might be able to use it in your financial planning.

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Alarm clock sitting atop a pile of cash. — Image source: Getty Images.

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Of course, the amount of money you can make depends on a few factors, such as how much you deposit, whether you receive your interest payments or leave them in the CD to collect compound interest, how long your CD's term is, and more. But especially in today's relatively high-rate environment, CDs can be a good means of earning nice returns on your money without taking on much risk.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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