What are certificates of deposit and how do they work?

CDs may be the right solution for your savings goals

A clipboard holding a paper that reads "certificate of deposit and a pen sitting on a desk
CDs are savings accounts that lock up your money for a period of time in exchange for better interest rates
(Image credit: designer491 / Getty Images)

Not to be confused with the metallic music-playing discs of the '80s and '90s, CDs — formally known as certificates of deposit — are a savings option still very much in play. This particular savings account option locks up your money for a certain period of time and in exchange, you earn interest, often at a better rate than your standard savings account.

While not the right solution for all savings goals, CDs can be worthwhile for a number of purposes.

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Becca Stanek, The Week US

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.