Definition
A bank deposit locked for a fixed term at a fixed rate, usually paying more than a regular savings account, with a penalty for early withdrawal. A ladder of CDs with staggered maturities balances yield and access.
Why it matters
CDs lock today's rate, which is valuable when rates are falling and irrelevant when they are rising. The early-withdrawal penalty is the price of that certainty, so CDs suit money with a known date.
Example
A saver with $30,000 for a house purchase in three years builds a ladder: $10,000 each in 1-, 2-, and 3-year CDs. Every year one matures for reinvestment or use, and no single lock covers the whole sum.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.