Difference between certificate of deposit and fixed deposit

FD is more flexible for smaller investors, longer tenures, and easier access / withdrawal (though with penalties). CDs are best when you have surplus funds you can lock for shorter periods, want slightly higher yield, and don’t need to use that money as loan collateral. Risk is low for both, but CDs require more discipline (cannot easily break them, less flexibility) and are more for institutional or high-net worth investors. The basic differences between certificate of deposit vs fixed deposit are as follows:

Fixed Deposits: 

• These are term-deposits offered by banks / NBFCs where you deposit a sum of money for a fixed tenure (from 7 days up to about 10 years) at a pre-agreed fixed interest rate. They are simple, safe, and predictable. 

• Depending on the bank, amounts required are small, sometimes as little as Rs1,000. FDs often allow premature withdrawal (with penalties), and many banks allow FDs to be used as collateral for loans. 

• Also, certain FDs (especially with lock-in of 5 years) may offer tax benefits under Section 80C.

Certificates of Deposit:

• On the other hand, Certificates of Deposit are also time/deposit instruments but are more suited for short- to medium-term investment horizons (usually 7 days to 1 year when issued by banks; financial institutions may offer up to 3 years).

• CDs typically require higher minimum investment (starting around Rs1,00,000 or more) and are often issued in larger denominations.

• Interest rates on CDs tend to be somewhat higher than on comparable FDs because of the larger sums and shorter, stricter terms. Importantly, CDs are usually not eligible to be pledged as collateral for loans, and they do not generally come with special tax-saving benefits.

This is all about the differences between certificate of deposit vs fixed deposit. I hope this helps!

When I started looking into investment options, I was unsure about the difference between a CD or Certificate of Deposit vs Fixed Deposit. Both seemed pretty similar at first, but as I learned more, I realised they serve different purposes depending on your needs. The principal amount that you invest here is the major distinction between a CD and a fixed deposit. Let me walk you through what I found out.

FD vs CD Difference

Here are the CD vs fixed deposit differences:

Ultimately, if you’re looking for stability, flexibility, and ease of access to your funds, FDs are a superb choice. But if you’re looking for better returns, CDs might be more suitable. I hope you understand CD vs FD differences.

Get Loan at Minimal Documentation, Low Interest Rates, and Swift Disbursal from NB InstaCash

Also Read: 

Why are CDs Risk Free than FD

Before telling you about the certificate of deposit vs fixed deposit, let me share with you what certificate of deposit and fixed deposit mean.

A certificate of deposit is a form of agreement between the investor and the bank where the investor pays an amount for a period of time and earns a good profit from it. The tenure of investment is fixed and afterwards, you can redeem your certificate of deposit.

On the other hand, a fixed deposit is a financial instrument where you can invest money for a fixed period of time and earn profit at a predetermined interest rate. 

Since both Fixed Deposit (FD), and Certificate of deposit (CD) are similar, let us understand the difference between certificate of deposit and fixed deposit.

Difference between FD and CD:

Although CDs can help you earn more interest FDs are better because it provides long-term investment and it is a risk-free investment. 

This is the certificate of deposit vs fixed deposit difference. I hope you find this helpful.

Read more: