What is a certificate of deposit? What’s different from a passbook?

What is a Certificate of Deposit? This is a highly profitable investment channel, quite safe compared to many other financial instruments. So what’s so attractive about certificates of deposit, let’s find out with Filipinance.com in the following article!

What is a certificate of deposit?

A certificate of deposit is a valuable document issued by a bank. Issuing purpose to raise capital from organizations and individuals.

Certificate of deposit is evidence confirming the debt repayment obligation between the issuer of valuable papers and the holder of valuable papers within a certain term, interest payment conditions and other conditions.

For investors, a certificate of deposit has the same meaning as a passbook. Holders of certificates of deposit are also entitled to interest rates and the right to give, donate and transfer according to regulations.


Certificate of deposit classification

According to the purpose and form, there are 3 main types of certificates of deposit:

  • Registered certificate of deposit: is a certificate or book, on which the owner’s name is clearly indicated.
  • Anonymous certificate of deposit: same as above, using certificate or bookkeeping. However, this certificate does not bear the owner’s name. So the holder of the certificate of deposit will have ownership.
  • Booked Certificate of Deposit: This valuable paper is non-transferable. In addition, this certificate is sold at par value, paying interest on the maturity date.

Advantages and disadvantages of certificate of deposit

Because they have similar characteristics to a passbook, certificates of deposit have the following advantages:

  • Is a safe investment asset, guaranteed by a large financial institution.
  • Both principal and interest are preserved, automatically renewed.
  • Has a higher interest rate than a savings account.
  • Owners can pledge or transfer.

Besides, certificates of deposit have the following disadvantages:

  • The holder must not expire before the expiration of the certificate.
  • Liquidity, cash conversion is not high.
  • If long-term investment low interest rate.
  • Can only be transferred in whole, not in part.

Because of these characteristics, when owning a certificate of deposit, the buyer needs a clear plan to use it. Some investors often consider the interest rates of savings, loans, buy certificates of deposit before deciding which type to own.

What is the purpose of certificate of deposit?

For investors, certificates of deposit are valuable papers that bring profits. For issuers, certificates of deposit have the purpose of raising capital.

When the market has fluctuations in lending interest rates, issuers prefer to choose short terms with higher interest rates than savings accounts for easy liquidity and conversion when needed.

At the same time, the issuance of certificates of deposit also helps issuers to achieve Basel II compliance. The aim is to increase medium and long-term capital sources, improve safety ratios in banking activities, and structure mobilized capital.


What are the benefits of joining a certificate of deposit?

Certificate of deposit is a safe deposit, high interest rate, easy to transfer, will help customers feel secure and meet flexible capital for future plans.

Outstanding benefits when buying certificates of deposit such as:

  • Earn interest. Usually, the interest rate will be higher than savings.
  • Transferable: When necessary, the customer can transfer at the price agreed with the buyer of the certificate of deposit. The bank acts as an intermediary to confirm the title.
  • In addition, the owner can also give, donate, donate, inherit, authorize according to the provisions of law and the issuing organization.

Compare certificates of deposit and savings book

Compared with passbook, the key difference is that certificates of deposit are valuable papers, while passbooks are not. This means that it is not possible to make transactions, buy and sell passbooks. Money certificates are assets.

Some differences when comparing the characteristics of certificates of deposit and passbooks are as follows:

Interest rate

  • Savings book: The average interest rate for 12 months is 6-7%.
  • Certificate of Deposit: Average interest rate of 9%, stable.


  • Savings books: have short and long term terms from 01 month to 36 months.
  • Certificate of Deposit: depends on the issuance but usually minimum 6 months, maximum can be up to 84 months.


  • Passbook: high liquidity, easy to convert into cash.
  • Certificate of deposit: it is often difficult to convert before maturity to cash unless the conditions of the issuer are satisfied, so the liquidity is less.

Should invest in certificates of deposit or savings?

Choosing whether to own a passbook or a certificate of deposit depends on your investment mindset, risk tolerance, and future expectations.

Therefore, investors need to assess the situation of the financial plan and the need for profitable investment. However, both of these investment channels are quite safe and suitable for investors with idle money.


What is a certificate of deposit? This is a valuable document. The bank has the responsibility and obligation to pay this debt to the owner with the agreed interest rate.

Leave a Reply

Your email address will not be published. Required fields are marked *