In the traditional sense a CD is not an investment at all but rather a high interest savings account. The major difference between a CD and a savings account or a money market account is the fact that once the money has been placed into a certificate of deposit account it cannot be withdrawn. With a money market account the money can be withdrawn but there may be some restrictions to this.

This a very safe way to set money aside considering the fact that the Federal Deposit insurance corporation (FDIC) insures the amount of the deposit up to $100,000 as long as the CD is with a financial institution that is recognized by the FDIC. These CD’s that are under $100,000 are considered a small CD. CD’s with a balance of over $100,000 is considered a Jumbo CD.

Jumbo CD’s are somewhat more risky considering the fact that they are not insured by the FDIC. However even without the insurance this can be a very safe method of savings. Most major financial institution will offer a variety of terms with a CD. The term of the deposit may range from 6 months to 20 years. Typically shorter periods of time will be reserved for amounts that exceed $10,000.

When determining how long you are going to put the money into the CD it is important that you give serious consideration to the term. Remember that once the money is in the CD you cannot get access to this money without a penalty. For this reason you should never deposit more into a CD than you are absolutely sure you can do without.

There is one key element of a Certificate of deposit that should be kept in mind. While the individual cannot access the money or change the terms without incurring a penalty the bank or financial institution reserves the right to change the term of the CD. This is referred to as a recallable CD. If the CD is recallable then the bank can cancel the CD based on a change in interest rates, in the case that this occurs the bank will create a new interest rate and hold the deposit for the previously determined period of time.