What a CDT is and how it works

A Certificado de Depósito a Término (CDT — a fixed-term certificate of deposit) is a product where you hand over a sum of money to a regulated financial institution for a previously agreed fixed term, and in exchange the institution pays you interest also agreed from the start. At the end of the term, you get back the capital you deposited plus the interest earned.

Typical terms

Regulation requires a CDT to be agreed for a minimum term of 30 days; from there, each institution offers different terms — 30, 60, 90, 180, and 360 days are the most common, and some institutions offer terms of several years. In general, the longer the term, the higher the rate tends to be, although this depends on market conditions and each institution — it isn't a fixed rule that always applies.

How the return is calculated

When you open a CDT, the institution tells you the rate in terms of the effective annual rate (E.A.), the standard way of expressing returns in Colombia. With that rate and the agreed term, you can estimate how much you'll receive at the end: the exact calculation depends on whether interest is paid only at maturity (the most common setup) or periodically (monthly, quarterly), which affects the final amount because of compounding.

Difference from a savings account

That's why a CDT isn't the typical place to keep an emergency fund: if you need the money before maturity because of a real emergency, you won't be able to take it out as easily as from a savings account.

What happens if you withdraw before the term ends

By regulation, a CDT can't be redeemed (cashed in) before the agreed maturity date — it's a fixed-term commitment, not a freely available savings account. In practice there are two paths if you need the money early:

• Early redemption, if the institution allows it: some institutions offer this as internal policy, not a legal requirement, and it almost always means losing part or all of the agreed interest, or paying a penalty.
• Transfer or endorse the CDT to someone else: in some cases you can transfer the rights of the CDT to another person, who becomes its holder, in exchange for them paying you now the amount you agree on between yourselves.

Neither option is guaranteed the same way at every institution: check the specific terms of your contract and your institution before assuming you'll be able to exit the CDT if you change your mind.

Protection for your money

CDTs, along with savings and checking accounts, are covered by the deposit insurance administered by Fogafin (Colombia's deposit insurance fund): if the institution holding your CDT were to be taken over and liquidated, the insurance covers your balance up to the current amount per institution. That coverage applies per institution, so if you have money in several, the limit is counted separately at each one — you can confirm the current figure on Fogafin's official site.

CDTs and your budget planning

Since money in a CDT stays committed until maturity, it only makes sense to put into a CDT money you already know you won't need before that date. Mixing short-term savings (for expenses that could come up soon) with money in a one-year CDT can leave you without liquidity right when you need it — another reason it's worth having a separate emergency fund first, in a liquid product, before committing additional money to long-term CDTs.

This is general financial information, not personalized financial or tax advice for your situation.

Frequently asked questions