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 savings product where you commit funds for a fixed period and earn a set interest rate for that term. It has a maturity date, and withdrawing money before the term ends typically carries an early withdrawal penalty. This combination—fixed term, fixed rate, and penalties for early withdrawal—defines CDs and explains why they often offer higher yields in exchange for reduced liquidity. The other descriptions describe accounts that don’t lock in funds for a fixed term: a savings account that lets you withdraw flexibly, a credit card with rewards (not a deposit at all), and a checking account with overdraft (a transactional account, not a time deposit).