What exactly is a Certificate of Deposit?

I just turned 18 and I am always trying to find new ways of saving money. I keep hearing people talk about something called a Certificate of Deposit.


I am just wondering is that another bank account?


Will is help me save more money?


I currently have a savings account and a checking account (I buy things online with a debit card) so will I still be able to get a CD?|||this is what i know about them;


These are offered by depository institutions like banks and credit unions but they are sometimes bought through established brokerages. These money market instrument is also referred to as a time deposit because they have specific investment durations like 3 weeks to five years much like bonds. Other things that these CDs have in common with bonds are a predetermined interest rate and being available in more than one denomination. To give evidence that you have invested cash into the institution, the certificate is awarded to you and the information that appears is the amount invested, the maturity date and the interest rate how the interest is calculated.





These certificates of deposit while they have a higher interest rate than T bills and savings accounts in banks have the down side of being a little riskier [just like bonds in that the higher the interest rate offered to the investor, the higher the risk of default the investor has to bear] but overall the interest offered is much smaller than most other investments.





Another advantage is the safety from the whimsical stock market and the ability to calculate what your cash will amount to when it matures.





Another thing about certificates of deposit is that there are restrictions on withdrawing cash. This can be a good thing in that the investor will not be tempted to withdraw cash all the time (and thus forcing him to delay gratification) and a bad thing in that he cannot count on the investment in when disaster comes a knocking. But it is worth adding that the larger denomination CDs can be sold before maturity.





They are perfect for keeping cash safe for a specific amount of time and I think that this is why security analysis recommends them.





i hope this helps|||A certificate of deposit is another savings vehicle. You'll notice that the CD has a higher APR, but the downfall is that when you put money into a CD you are agreeing to leave it there for a fixed amount of time. The higher the APR, the longer the period of time that you cannot touch your money.





An option that I found to help was a savings accoutn with Ally.com. I still have my normal checking, and my normal savings.. but Itransfer money into my Ally account and it earns 1.37% as opposed to my banks .03% APR on savings.





If you can live without your money (you'd have to pay a penalty for early withdrawal) for 18 months or more, then a CD is a solid vehicle to earn some interest.