wealth-coop

What it is

You hand a bank a lump sum and agree not to touch it for a fixed time: six months, a year, up to five years. In return the bank promises a fixed interest rate for the whole period, higher than an account you can dip into, because the bank knows it can rely on your money.

At the end of the term you get your money back plus the interest. During the term you usually cannot withdraw at all, or only by giving up some or all of the interest.

It is the simplest way to earn a known return: no prices to watch, nothing to sell. The trade-offs are that your money is locked, and if rates rise after you lock in, you are stuck with the old rate.

How it works

You choose a term and a provider and pay in a lump sum; minimums range from a small sum to a few thousand depending on the provider.
The rate is fixed on the day you open it and does not change for the whole term.
Interest is paid at the end, or yearly or monthly into another account, depending on the product.
At maturity the provider writes to you; if you do nothing, many roll the money into a new term or an easy-access account at whatever rate applies then.

The honest pros and cons

For

You know exactly what you will get back, to the penny.
Usually higher rates than easy-access savings, because you have given up access.
Protected by a deposit guarantee scheme in most countries, up to a limit per person per bank.
No fees, no prices to watch, nothing to sell.

Against

Your money is locked; an emergency means losing interest or being unable to withdraw at all.
If interest rates rise after you lock in, you keep the old, lower rate until maturity.
Inflation can quietly beat the rate, so the money buys less at the end than at the start.
Interest may be taxed as income, depending on where you live and how you hold it.

Getting it in Brazil

CDB available

bank certificates protected by the FGC deposit guarantee up to R$250,000 per bank per person

Account type: Conta em corretora (brokerage account)

LCI e LCA available

real estate and agribusiness letters, income tax exempt for individuals, also FGC protected

Account type: Conta em corretora (brokerage account)

Wherever you are

Decide how long you can go without the money; never lock away your emergency fund.
Compare rates across providers for that term; the best rates are often from smaller banks you have never heard of, which is fine if they are covered by the deposit guarantee.
Check the deposit guarantee covers the provider, and keep your total with any one banking group under the limit.
Open the account online, pay in, and diarise the maturity date so the rollover is your decision, not the bank's.

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Go deeper

Also called

fixed-rate bond, fixed-term deposit, certificate of deposit (CD), guaranteed investment certificate (GIC), plazo fijo, CDB

Often confused with

Government bond: A loan to a government that pays interest and returns your money on a set date, called its maturity.
Savings account: Money kept at a bank that pays interest and can be withdrawn at any time.