A certificate of deposit, also referred to as a CD, is a time deposit at a bank, credit union, or other financial institution. However, the certificate of deposit cannot be withdrawn until an agreed upon date known as its maturity date. If a withdrawal becomes a necessity, the financial institution will assess a penalty—usually the loss of interest.

A depositor will earn more interest on a certificate of deposit than the amount earned on a savings account or money market account. The length of a certificate of deposit could be one month, three months, six months, one year, 17 months, three years, etc. Generally the longer the time until maturity, the higher the interest rate.

A CD that matures in less than one year will be reported by the bank as a current liability, and will be reported as a short-term investment by the depositor (provided the amount is not restricted by the depositor).