what are cd's(banking)and how do they do they work?

Answer 1

A certificate of deposit, also referred to as a "cd", is a legal agreement with a bank that allows the bank to use the money you've deposited for a stated rate of time, and for the privilege of using your money, the bank will pay you a stated rate of interest. For instance, let's say you want to open a cd at your local bank for 12 months and you have $1,000 to deposit. The bank will fill out the paperwork which will have your name, address and social security number (for tax reporting purposes, because interest income is taxable). The paperwork will also verify the amount of deposit and the rate of interest. When the 12 months is done, the bank will contact you to let you know that the certificate is coming due. You will receive your original deposit of $1,000, plus interest income on that amount.

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