Time deposits (CDB, CDT, plazo fijo, pagaré)
Low risk
What it is
You lend money to a bank for a fixed period in exchange for a fixed (or sometimes inflation-linked) rate, usually higher than a plain savings account. Known as CDB in Brazil, CDT in Colombia, plazo fijo in Argentina and pagaré/depósito a plazo in Mexico.
How to buy it
Open one directly through your bank's app, or via a broker that offers third-party CDBs/CDTs (often at better rates than your own bank). Choose the term carefully — withdrawing early can mean losing part of the return, or isn't allowed at all.
Pros
- Higher rate than a savings account for the same low risk
- Usually covered by deposit insurance up to the local limit
- Predictable, fixed return if held to maturity
Cons
- Money is locked for the chosen term
- Early withdrawal often penalized or disallowed
- Deposit insurance has a cap — large sums may exceed it at one bank
What it actually costs
There is usually no visible commission — the cost is structural. Your money is unavailable for the whole term, and getting out early means either a penalty or selling the title to someone else at a worse price. Tax is withheld on the nominal interest, so in a high-inflation year you can pay tax on a gain that did not exist in real terms.
Who it suits, and who it does not
It fits money with a known date attached — a tax bill in nine months, a tuition payment, a purchase you have already decided on. It is a natural second step for someone who already has an emergency fund in a liquid account and wants a better rate on the money sitting behind it. It is a poor fit for the emergency fund itself, precisely because emergencies do not respect maturity dates.
A worked example
A 12-month CDT at, say, a rate a few points above inflation turns a fixed sum into a known, larger sum a year later — the tradeoff is that the money is unavailable if an emergency comes up before the term ends, which is exactly why the emergency fund comes first.
Common mistakes with this instrument
- Locking every peso on the same date instead of laddering several shorter terms, which keeps part of the money reachable and reprices gradually.
- Comparing a nominal annual rate against an effective annual rate as if they were the same number.
- Holding more than the deposit-insurance limit at a single institution because the rate there was the highest.
How to reach it, country by country
The same product wears a different name in each market: CDB in Brazil, CDT in Colombia, plazo fijo in Argentina, depósito a plazo in Chile and Peru, and pagaré or a fixed-term investment account in Mexico. Coverage schemes differ too — FGC, Fogafín, IPAB, the Chilean deposit guarantee and Peru's Fondo de Seguro de Depósitos each set their own per-person limits.