I was asking my friend earlier what a CD is in banking since he is currently working for a bank… I told him why would a depositor need a CD if he already has either an ATM card or a passbook? He just burst in laughter and told me that a CD in banking is not a compact disc to save any information or files but a certificate of deposits.

He explained further that a certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions. He said CDs are similar to savings accounts in that they are insured and thus practically risk-free; they are “money in the bank” (CDs are insured by the FDIC for banks or by the NCUA for credit unions). They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest. I then told him I know what a time deposit is and he should have just told me that it is just similar to it instead of reciting an epic about it.