Features & Glossary of a Time Deposit / Certificate of Deposit

• Interest rate: The interest you earn for keeping money with a bank. It is published annually.

• Interest payment frequency: The frequency at which the interest is credited in your account - could be monthly, quarterly, semi-annual, annual or on maturity. Each banks offer decides its own frequency.

• Maturity period: Time for which your money is locked in. For time deposit (TD), it could range from one week to multiple years; for certificate of deposit (CD), it may vary from 3 years to 10 years for a CD (some banks market 1-year CD)

• Early or Pre-mature withdrawal penalty: Penalty levied in case you withdraw money from your deposit before the maturity date. Generally, banks don’t allow early withdrawal within the first 6 months of booking a CD. After 6 months, they allow early withdrawal, but at a penalty rate that is rather high.

• Overdraft / credit card facility: most banks allow you to have an overdraft line or a credit card against your TD / CD. This feature allows you to use your money, even when it is locked-in in the deposit. But it comes at an extra cost - depending on the bank, you could be paying 2% to 5% interest over what you earn on your deposit. So if your CD pays 10% interest, and the bank charges 5% over for an overdraft line, you will pay 15% interest to the bank for any money you withdraw from the overdraft line.