What are Certificates of Deposit (CDs)?

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Certificates of Deposit (CDs) are a great way to invest your money. They’re safe, secure, and easy to open. In this article, we explain how CDs work and their benefits.

Key Takeaways:

  • A certificate of deposit is a savings account that offers a higher interest rate than a regular savings account.
  • CDs are suitable for people who don’t need their savings right away.
  • Most CDs have short maturities and fixed interests so you don’t have to worry about losing money.

What is a Certificate of Deposit (CD)?

A Certificate of Deposit (CD) is a type of savings account that typically offers a higher interest rate than traditional savings accounts. 

This instrument behaves like a time deposit, meaning it allows you to leave money in the account for a specific amount of time and can’t withdraw it before maturity without facing penalties.

How do CDs work?

A Certificate of Deposit works like a regular savings account, but with a few key differences:

  • You deposit money into the CD. The bank pays you interest on that money.
  • Your interest rate depends on how much you invest. 
  • You can’t withdraw your money until the CD reaches maturity. If you want to access your savings before then, you will pay an early withdrawal penalty. 

CDs and Cowrywise locked savings

CDs are locked for a certain period of time just like our locked savings on Cowrywise.

Customers that want to make a huge purchase in the future like a down payment for a house, buying a car or wedding expenses, usually lock it up in a CD in order to be disciplined and not tempted to withdraw. 

Payment into this instrument is mostly a one-time thing and is usually made as a lump sum. So one should give it a considerable amount of thought before going ahead to fix their money in a certificate of deposit.

Similarly to Cowrywise locked savings, you can select a short duration that meets your needs and roll over afterwards depending on your preference.

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Benefits of certificates of deposit

  • You get higher interest rates than regular savings accounts. 
  • A CD is an investment product with a fixed term and fixed interest rate, which makes it more secure than a traditional savings account.
  • There’s little to no risk of losing your principal 
  • They are NDIC-insured. Banks are NDIC insured so CDs derive protection from this.

Who are CDs for?

CDs are ideal for investors who know that they won’t need access to their funds immediately but still want some financial benefit on their money while it’s sitting there in a savings account.

Who offers CDs?

Banks offer CDs with a variety of terms and interest rates. Examples of banks that offer certificates of deposit in Nigeria include Zenith Bank, Sterling Bank, Fidelity Bank, etc.

Before deciding on a CD and opening an account with a bank, do your research on what types of CDs are available from different financial institutions.

Different banks have a minimum amount and minimum holding period; the higher the duration, the higher the returns.

How much can I make from a CD?

The amount you earn will depend on the interest rate, which is determined by the bank. CDs also come with different lengths of time (term), so the longer you commit to a CD, the higher the rate you can get.

Do CDs have fees?

Typically, CDs have some sort of fee associated with them. These fees are typically low. Some banks will charge a monthly or annual maintenance fee for keeping an active CD account open.

How does a CD compare to an online savings account?

CDs have fixed interest rates for set periods of time (often several months or years). However, online savings accounts may offer variable rate options that change based on the market.

Certificates of deposit vs Fixed deposit

In Nigeria, there isn’t so much difference between a certificate of deposit and a fixed deposit. A fixed deposit (FD) is similar to a CD in that funds are locked in for a set period of time. 

Learn more about Fixed deposits.

How do I open a CD on Cowrywise?

Certificates of deposit make up part of fixed-income and money market funds. Hence, while investing in money market funds on Cowrywise, you get to invest in a CD.


A certificate of deposit (CD) is a type of savings account that you can open at a bank. It offers an interest rate that’s higher than what you’d get with a regular savings account, but typically lower than what you’d receive from other investments like stocks and bonds. 

Hopefully, this guide has helped clear up any bit of confusion you had about Certificates of Deposit. 

If you have other financial instruments you want to know more about, feel free to share them in the comments.


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