What does a certificate of deposit (CD) primarily represent?

A certificate of deposit (CD) primarily represents a savings certificate with fixed maturity. This financial product is offered by banks and credit unions, allowing individuals to deposit a specific amount of money for a predetermined period, typically ranging from a month to several years. In exchange for locking in their funds for that period, the investor usually receives a higher interest rate compared to a regular savings account. The fixed maturity date means that the money must remain in the account until that date unless the investor is willing to pay penalties. This characteristic makes CDs an appealing option for those looking to save money securely while earning a guaranteed return over time. The nature of CDs also means they do not function like checking accounts, loans, or stock investments, which serve different financial purposes.