A CD is a savings product. When you agree to purchase a CD, you agree to leave the money on deposit with the financial institution for a specified term. CDs usually pay a higher interest rate than other savings products because you agree not to make any withdrawals until the CD comes due. If you do withdraw your money before maturity, you usually must pay a penalty.
To attract and retain clients, institutions use creative marketing strategies when designing CD products. The main requirement is that both the institution and the client live by the terms that are set when the purchase is made. Since clients’ needs vary, institutions usually offer several products with different terms and features. For example, it’s possible that you could choose from among CDs with terms that range from three months to six years. Some institutions will bump up the interest rate a specified number of times during the term. Another popular twist is to allow clients to make deposits anytime throughout the term at the original interest rate. Then if the rates go down, the client has the advantage of depositing at the better rate.
If you are thinking of purchasing a CD, or looking for one to refer a client to, shop around and select the product that offers the options you, or your client, are most interested in.