A Certificate of Deposit is issued when a person deposits an amount of money for a fixed time period with a specified amount of interest to be issued on it later. Savings accounts work as a substratum for solving many people’s financial matters since a savings Account is considered to be the safest place to store money. There are some other types of savings accounts where you can deposit cash for a fixed duration under a specified interest rate and let your money grow until the maturity of the account. After depositing money in such accounts, a certificate of deposit is issued as an affirmation of the agreement over the terms and conditions for that account. These kinds of accounts are considered to be the safest and risk-free medium to save an amount of cash you don’t need for some time in the future. The term or the duration of these accounts may vary accordingly and everything is recorded in the certificate of deposit as a proof.
A certificate of deposit is basically a financial tool issued by the bank or any other financial institution implying that the individual has deposited an amount of cash and has agreed to the term with the institution. A certificate of deposit also prevents the holder to withdraw any cash from such account since withdrawing funds before maturity can induce penalty. Such accounts differ from other savings accounts in terms that these usually provide a comparatively higher rate of interest once the account is mature. A certificate of deposit is a legal affidavit that must include the exact amount of cash deposited in the account. It also incorporates the interest rate that has been fixed with the consent before commitment or one that suits the certificate holder. Term length, i.e. the duration or the time period for how long the cash has to be kept deposited before it is withdrawn must also be mentioned clearly in the certificate of deposit. In the end, a certificate of deposit is signed and stamped by the institution’s representative.