A certificate of deposit pays higher interest rate than a savings account because the money is: B) Kept by the banks for a longer period of time. If you agree to put money into a certificate of deposit it is typically for a minimum of three months to a maximum of 5 years. Because this is such a long period of time it can incur more interest than a savings account.
The rate of interest on a certificate of deposit is higher than the savings account because the money is kept by banks for a longer time period.
A certificate of deposit (CD) is an instrument offered by the banks to its customer who agrees to deposit a lump sum for a specific period without withdrawal.
The term of CD is generally longer than the savings account. The longer the term, the more will be interest.
A savings account on the other hand is a financial product that allows the holder to deposit and withdraw their money at any time. The rate of interest is generally 0.50% which is lower than the interest on CD.
Therefore, it can be concluded that CD offers a higher rate of interest than a saving account as the tenure of CD is longer than the saving accounts.
Hence the correct option is B.
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