Certificates of Deposit or CDs are standard bank products that pay a stated yield or interest rate for a specified term. CDs typically pay a higher interest rate than a standard savings account because you give up the use of your funds for a specific period. Since CDs are backed by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000, they are very low-risk products.
When you open a CD, you can select your maturity date to match your needs. For instance, if you are planning a trip in two years, you can invest in a 24-month CD. The most common term lengths for CDs can be anywhere between 90 days and five years. Generally speaking, the longer the term of your CD, the higher the interest rate you will earn.