A time deposit is a bank account designed to earn interest while limiting withdrawals for a fixed term.
Customers agree to leave money deposited until a stated maturity date, such as three months, one year, or five years. In exchange for reduced access, the bank generally pays a stated or agreed interest rate. Certificates of deposit are a common form of time deposit, particularly in the United States.
Withdrawing early may result in a penalty, reduced interest, or other restrictions. The exact terms depend on the institution, jurisdiction, and product contract. Some time deposits automatically renew when they mature unless the customer gives instructions.
Time deposits differ from demand deposits. Checking accounts are generally demand deposits because funds can be withdrawn on request, while time deposits trade liquidity for a more predictable return.