Fixed rates are common, but some institutions offer CDs with various forms of variable rates. In exchange for the customer depositing the money for an agreed term, institutions usually offer 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. In the United States, CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions.
The bank expects the CDs to be held until maturity, at which time they can be withdrawn and interest paid. CDs typically differ from savings accounts in that the CD has a specific, fixed term before money can be withdrawn without penalty and generally higher interest rates. A certificate of deposit ( CD) is a time deposit sold by banks, thrift institutions, and credit unions in the United States.
