A CD, or Certificate of Deposit, is a type of savings account offered by banks and credit unions. When you purchase a CD, you agree to leave a certain amount of money on deposit for a fixed period of time, ranging from three months to five years, in exchange for a fixed interest rate that is usually higher than a regular savings account. CDs are considered low-risk because they are FDIC-insured up to $250,000. However, withdrawing money early from a CD means paying a penalty fee to the bank. When shopping for a CD, it is important to compare different offers by looking at the term, the interest rate, and the amount of the penalty for withdrawing money before the end of the term. CDs come in varying terms and may require different minimum balances. The rate you earn typically varies by the term and how much money is in the account. In general, the longer the term and the more money you deposit, the higher the rate you are offered.