What are time deposits commonly referred to as?

Time deposits are commonly referred to as certificates of deposit (CDs) because they represent a financial product offered by banks and financial institutions that allows customers to deposit money for a fixed period of time, typically with a fixed interest rate. When an individual invests in a CD, they agree not to withdraw the funds for the predefined term, which can range from a few months to several years. In return for this commitment, the bank typically offers a higher interest rate compared to regular savings accounts, making CDs an attractive option for people seeking a safer investment with guaranteed returns over a specified time frame.

In contrast, mutual funds are a pool of funds collected from multiple investors to invest in various securities, checking accounts are used for everyday transactions and do not typically earn significant interest, and demand deposits refer to funds that can be withdrawn at any time without any advance notice, such as money in checking accounts. This distinction highlights why certificates of deposit accurately describe time deposits.