Identification

• With a bank CD, the account holder promises to leave the money in the bank for a set period of time. This is known as the maturity date.
  
  

Types

• Short-term bank CDs usually have a maturity date of up to a year. Common terms are three months and six months. Long-term bank CDs mature in one year or longer, and some banks offer CDs with terms as long as 10 years.
  
  

Features

• Typically, the longer the term for the bank CD, the higher the interest rates. Some banks offer CD specials that give higher rates for people depositing a certain amount of money or who are new to the bank.
  
  

Penalties

• If you withdraw money from your bank CD before the maturity date, your bank is likely to assess a penalty equal to a certain number of day worth of interest.
  
  

Taxation

• The interest earned on your bank CDs is subject to federal and state income tax. An accountant or tax professional can help you determine how much you need to pay.
  
  

Insurance

• Provided that the bank that issues the CD is FDIC-insured, the money and interest in a certificate of deposit is automatically covered up to a certain dollar amount from the Federal Deposit Insurance Corporation. This protects the account in case of a bank failure.