As far as I know when someone wants to deposit money in a bank he can choose between a deposit account and a certificate of deposit. With a deposit account a person is assigned an account bound to his name and only that person or someone to whom the person delegates the right can withdraw money. With a certificate of deposit there's no account, just a document stating that the person who brings that paper can withdraw money from the bank and is entitled to the accumulated interest.

Looks like the account offers more protection. Unless the account holder tries to withdraw money those money can't be stolen. If all the holder's stuff is lost in a fire it wouldn't matter - the account data is maintained by the bank. So money are more or less secure in case of any reasonable accident.

A certificate looks less secure. It's like paper money with interest. Anyone can steal it. If it burns or gets lost or whatever else the bank can deny money withdrawal.

What are reasonable advantages of a certificate of deposit compared to a deposit account and in which situations do these advantages outweight the problems of the certificate of deposit?

1 Answer 1


The consumer who opens a CD may receive a passbook or paper certificate, it now is common for a CD to consist simply of a book entry and an item shown in the consumer's periodic bank statements; that is, there is usually no "certificate" as such.


Generally speaking, CDs should offer higher interest that typically doesn't vary, over the term of that CD. So, in that way it offers a bit more security on the return. But, they also lock up your money for a specific period of time.

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    Another option is interest-bearing checking accounts, especially in today's rather odd U.S. economy. My checking account has a higher rate than any savings account and any CD less than 2 years in length. Aug 12, 2010 at 14:26
  • @stephen Good point. Aug 12, 2010 at 20:30

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