Banks and financial institutions offer CDs. A certificate of deposit (CD) is a type of savings account that pays a specified fixed interest rate for holding a fixed amount of money for a specified period. CDs pay a higher interest rate than regular savings accounts since CDs lock the money for fixed periods, ranging from months to years.
Longer-dated CDs pay a higher interest rate than shorter-dated CDs because the bank or financial institution has a longer time frame to invest the funds. CDs purchased through a federally insured (FDIC) bank are insured up to $250,000.