Which statement describes a Certificate of Deposit?

Which statement describes a Certificate of Deposit?

• A. Type of savings account that pays a set interest rate on money deposited; fixed term; maturity date; early withdrawal penalties
• B. A flexible withdrawal savings account
• C. A credit card with rewards
• D. A checking account with overdraft

Answer: (A)

A Certificate of Deposit is a time deposit that requires leaving your funds with the bank for a fixed period in exchange for a guaranteed interest rate. The defining features are a fixed term, a maturity date, and penalties for withdrawing funds early. Because you commit the money for the term, you typically cannot access it before maturity without a penalty, which helps the bank offer a higher rate. This differs from a flexible withdrawal savings account, which lets you move money in and out without penalties, often with variable rates; a credit card with rewards is a borrowing tool, not a deposit; and a checking account with overdraft is used for everyday transactions and may include overdraft protection, not a fixed-term savings instrument.