| Annual Percentage Yield (APY) | The effective annual rate that reflects the total amount of interest paid on the account, based on the interest rate and frequency of compounding for a 365-day period and calculated according to the rules developed by the Federal Reserve. |
| Certificate of Deposit (CD) | Also called time deposit, this is a certificate issued by a financial institution that indicates a specific sum has been deposited. A CD bears a maturity date of up to two years and a specified interest rate for that period of time. |
| Compounding Interest | Interest earned on previously earned interest as well as on the principal (the original amount deposited excluding any interest earned). |
| Individual Retirement Account (IRA) | Any of three types of IRA accounts, including traditional, Roth and Education IRA. Depending on the type of account contributions may or may not be deducted from taxable income and earnings may not be taxed until disbursed, or in the case of Roth and Education IRAs may be tax-free. |
| Penalty for Early Withdrawal | Most Certificates of Deposit have a penalty when withdrawal occurs before the specified maturity date. This penalty frequently represents an amount equaling three months interest on the account. |
| Term of Deposit | The contractual maturity or length of time funds must remain on deposit. |
