Fixed Income Instruments: Time Deposits (CDs)
How CDs (Time Deposits) Work
CDs combine benefits of both savings accounts and investment accounts, and are best for those who don't need to access their money right away. This is how they work:
You Lock in Your Rate for a Specified Period.
You lock in interest rates for a specific amount of time (called a term).
You agree to keep your money deposited for the agreed-upon length of time. For example, if you deposit $1,000,000 in a 5-year CD, you can't withdraw the money before the 5 years are up, without paying a penalty called an early withdrawal fee.
How Interest is Paid.
Interest is compounded daily1,2 and is paid monthly, quarterly, semi-annually, annually or at maturity. Typically, it is paid at maturity for terms of less than 1 year and annually for terms of more than 1 year. You can have your interest reinvested or transferred to your American International Demand Deposit Account3 or paid to you via wire transfer.
What Happens at Maturity.
When your time deposit matures, it automatically renews for the same term as the previous term, at the rate in effect on the maturity date. A “grace period” begins at maturity and ends 7 calendar days later. During this grace period you may without a fee:
Make withdrawals (up to the full amount in the time deposit)
Change the term or balance of your time deposit
Make 1 additional deposit
Close the time deposit
Why are CDs Sometimes called Time Deposits?
In the past, when you opened a traditional Certificate of Deposit (CD), the deposit was represented by a paper certificate, which must be presented and surrendered to withdraw funds or close the account. American Intercapital Depository & Trust does not issue a paper certificate and instead the deposit is tracked by an account number. We now use the name Time Deposit in addition to the Certificate of Deposit or CD.
1. Interest is calculated and compounded daily from the date of deposit to the date of withdrawal using a 365-day year (366 days in a leap year). Fees could reduce the earnings on the account.
2. When interest is compounded it means that both your principal and your interest earn interest.
3. For terms of greater than 12 months, interest must be paid at least annually.
Services Overview
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