What does 'CD' stand for? Is it same or simillar as Canadian GIC?

Oldman answered 10 months ago …

A 'CD' is a Certificate of Deposit, at a bank (altjough broker-dealers can also barter or exchange them) which is a term deposit for 2 months to up to 5 or more years.

The deposit is a contract to earn a certain interest rate for the term, and there are usually reductions in interest credited to the contract if it's terminated early, by the purchaser ("called a penalty").

It differs from a guaranteed interest contract (a GIC), because the principal and interest up to $1000,000 USD are backed by the Federal Deposit Insurance Corporation as part of the U.S. Treasury's arrangement to provide such insurance for depositors at banks in the U.S....while the GIC may have insurance from a commercial insuror, such as Allstate or Metropolitan Life Insurance Co., as to the security and timeliness of credited interest and payment; they aren't the same in the U.S.

In other countries, GIC's have some governmental backing, but this is variable. GIC's are often purchased in tax-deferred accounts in the U.S., by both workers and private individuals, without the intervention of any 'Bank". They are then considered "fixed interest {unvarying interest for the term of the contract} deferred investments". The most common is a "fixed annuity", purchased at a discount to the final value with a single or systematic investment...which will pay a lump-sum or a series of annuitized payments at some future date.

Because these CD's and GIC's, in the U.S. and in Canada, are taxed at the Federal (and Provincial/State) level with "income taxes' based upon the credited earnings, they are often held in tax-sheltered accounts.