History of Banking Certificates of Deposit
- Banks first began offering what was the predecessor of CDs as early as the 1600s in developing Europe. As a secondary business to providing exchange services for trade business, deposits and lending became profitable as local depositors needed a place to put their own profits. To generate new funds to lend, banks had to reward depositors somehow for use of their funds.
- 1913 brought the enactment of the Federal Reserve Act from Congress, requiring uniform behavior of banks in the United States. This Act became the predecessor to changes after the 1929 stock market crash, when the Federal Deposit Insurance Corporation was created to safeguard bank deposits. CDs then became as popular and safe as bonds, being insured by the FDIC after 1933.
- For many years going into the 2000s, the FDIC insured CDs up to $100,000 per CD account. With the recession of 2008, the federal government created a temporary additional coverage limit up to $250,000 per CD account for savers. This benefit will expire and drop back to $100,000 at the end of 2013 if not made permanent.