How does having a bank "cd" work?

Question

i am not really fond of this so i want to know what it is and how it is beneficial

Answer 1

You deposit your money in the bank and agree to leave it there for a certain specified amount of time. In return, the bank agrees to give you a certain specified interest rate on your money. It's generally a better rate than your money would get if you just kept it in a regular savings account.

In general, the longer the term of the CD, the higher the interest rate.

If you take your money out before the term of the CD is over, you will be charged a penalty. So having a CD is a good way to force yourself to leave the money in the bank instead of spending it,