The name 'certificate of deposit' remains for historical purposes when actual paper certificates were issued to certify the deposit agreement. Usually longer-term deposits come with higher interest rates at the cost of locking in of capital and higher inflation risk. The key characteristic of a CD is its rate of interest - the higher, the better, all else being equal. Most deposits have compounding interest rate, meaning that the accrued interest on the principal is periodically added to the principal, resulting in a growing amount of interest without additional money deposits.
Most often deposits have a term of 3 months, 6 months, 12 months (one year), or 24 months (two years). Deposit term lengths usually range from 1 month to 5 years, rarely more.
