Financial Products Series: Certificate of Deposit

The Financial Products series, to briefly explain and evaluate a wide variety of financial products/ This series should be useful to anyone who wants to gain a brief knowledge of different financial products.

This article is the seventh in a series of 12 that outlines in simple terms different financial products, how they work, advantages and disadvantages, and how I would rate them. The Products that this series will cover are:
  2. Structured Products
  3. Cash
  4. Current Accounts
  5. Savings Accounts
  6. Annuities
  7. Certificate of deposit
  8. Options
  9. Treasury Bills
  10. Bonds
  11. Tracker funds
  12. Credit
If any of you can think of any other financial products that you feel deserves a place on this list please get in touch and let me know, or else comment below.

Certificate of Deposit (Treasury Deposits in the UK)

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Simply a certificate of Deposit is a place to hold money in between investments. It is a fixed term (typically a month or longer), fixed interest contract taken out with the Governing Bank of a particular country (Bank of England in the UK). You can purchase Certificates of Deposit through most local banks. Certificates of Deposit can accommodate the majority of currencies. The term and interest rate of the agreement depend on the amount the investor wishes to deposit: 
  • Minimum investment is £10,000 or more for a 6 month term
  • £50,000 or more is required for a one month term
  • For terms shorter than one month the investor would need substantially more money invested
CARE: Some banks will automatically reinvest your Certificate of Deposit when it reaches the end of its term unless you specify otherwise. Make sure that you understand all the nuances of your investment.


  • Similar to savings accounts in that they are insured and are thus guaranteed. This product is fairly riskless
  • Rates of interest are higher than savings accounts


  • Rates are below that of the stockmarket
  • Require relatively high minimum amounts (£10,000 or higher)
  • Highly illiquid asset as you cannot withdraw early from the agreed term

Overall conclusion

In my opinion these products are better than other forms of savings accounts that are connected to banks, assuming you have enough money to invest in a Certificate of Deposit, and assuming that you do not need to touch your savings for long periods of time. 

Score: 7

Advice: The longer the term of the Certificate of Deposit contract, the higher the rates of return. If you can afford not to touch your money for long periods of time (say 10 years) then you can earn decent rates of return on your investments. If you can't then this financial product is probably too illiquid for many.

Readers, some personal finance bloggers are big fans of the Certificate of Deposit (eg Financial Samurai). I have my doubts about the liquidity of Certificates of Deposit and its relatively smaller rates of return when compared to shares. What are your thoughts on the subject? 

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