At the bank what is a CD and what does it do?

Question

How do I open one and how much do I need? All information would be very helpful!

Answer 1

a CD stands for "certificate of deposit".  how much do you need to open varies from bank to bank.  with every CD, there's a maturity date, i.e. 6-month, 9-month, 1-year, 3-year or 5-year, etc.  the longer the maturity date, the higher interest payment.  say for example, Wamu offers a CD for $1,000 with a 1-year maturity date at 5.25% interest.  that means you deposit $1,000 with the bank.  the bank gets to keep your $1,000 for one year, during which time, Wamu takes the money and put it in other higher yield investments.  after one year, they will give you back your $1,000 plus 5.25% interest.  if you withdraw the $1,000 before the maturity date, you would normally have to pay a penalty.