About CD Accounts

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CD accounts, for certificates of deposit, are bank instruments in which a short term is used to accrue interest on a given amount of money. Find out how interest gets compounded over a period of time with help from a registered financial consultant in this free video on money management and personal finance.

Part of the Video Series: Money Management
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Video Transcript

This is financial adviser, Patrick Munro, talking about CD accounts. Certificates of deposit. These are bank instruments that savers are able to take money to a bank and in a short term time horizon give that money to the bank for the purpose of occurring interest. Most notably the interest is compounded over a period of time, ranging from three months normally to six months to a year, sometimes as far as five years. The longer you have as a time horizon that you give your money to the bank in the form of a certificate of deposit, the higher the interest rate that you'll achieve. It's notable though, that certificates of deposit are also known as certificates of disappointment, because you have to pay the taxes on the gain that comes from the CDs. CDs of course in this interest rate environment are not paying a lot relative to inflation. So be mindful of that when you shop for the best for the best rate. This is Patrick Munro talking about certificates of deposit.

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