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A CD is a Certificate of Deposit. Typically, a depositor puts money in a bank and promises to leave it there for a given amount of time. If the depositor does so, the bank repays the money plus a given amount of interest. The general rule is that a depositor who withdraws their money before the specified period of time will be forced to pay a penalty for early withdrawal.
The reason for this is that a CD pays a higher rate of interest than a regular savings account. The bank gives the higher rate in return for the knowledge that it can hold on to that money for a set period. This allows it to lend that money out for a longer period itself and get more money for doing so.
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