The abbreviation of CDS may have lots of references, especially in the different fields, like in technology, it may mean computer design systems, in science it may mean collecting dust system, in defense it may mean cross domain solutions. Even in finance it has multiple meanings including Canadian Depository for Securities, Certificates of Deposit Credit default swap,  Counterfeit Deterrence System. We will confine to the Certificate of deposits. These are usually issued by financial institutions, like banks or other limited liability companies in exchange for money (loan) and bear fixed maturity periods, usually short periods like three or six months. Upon maturity, one can withdraw the principal sum together with the accrued interest.

Purpose
What is the prime aim of CDS? CDS are issued with the objective of raising funds to sort out liquidity problems. Thus it is a form of borrowing money. As for the bank, you may find that CDS are made more attractive than a savings account by having a higher interest rate, than the savings account would bear. Many big reputable firms have also started issuing their own CDS to raise funds, and depending on the urgency and availability, the interest rate would vary. Lenders would also demand more when they know the firm is not a very reputable firm.
 
Mechanism
The interest rate may be fixed or variable interest, but the time period would usually be fixed, though some have the flexibility of withdrawing on demand.  You will also find that some have a bump up feature which gives the lender the option of interest readjustment, usually once within the period that the CDS is valid. There are times when the CDS is pegged to the stock exchange, other indices or the bond market. The ones bearing fixed interest rates, you will find, that they would have a lower rate, the reason being, that the risk is normally much lower. The higher the risk, the higher the return. That is not to say the variable is better than the fixed. It all depends on what risk level one is willing to take.

Variable interest
You may be wondering how the variable interest rates are arrived at or what the determining factors are. Basically, the more the principal amount, the more the interest rate, as one is assumed to be taking a higher risk. The further the maturity period is, the higher the rate. The bigger or more reputable the firm is, the lower the rate, as risk is assumed to be lower. The firm that lacks insurance would attract a higher interest rate. The general assumption here is that, risk is inversely proportional to risk. Though it must be said that risk is quite subjective and would usually be affected by the amount of information that one has.

Credit 
Institutions would normally ask for credit through CDS and one then applies by depositing a certain amount of money. And, an institution in a bid to encourage lenders to deposit more money would offer higher rates for those depositing higher brackets of money. The lender, once they have deposited that amount of money, would be given a certificate, though some banks now just pass a single entry on the bank statement indicating that the customer has purchased a CDS. This has negated the need to have the actual certificate issued, though you may at times want this certificate to use as a proof of funds deposited. Interest accrued is at times paid into the lenders account periodically as agreed. 

Maturity
This CDS comes with a fixed maturity period, and in a bid to discourage lenders from early withdrawal, they would have heavy penalties which may at times not be worth withdrawing early. Some times lenders are forced to withdraw money early because of unforeseeable circumstances beyond their control.
 
Once the maturity period reaches, the bank can automatically pay the principal together with accumulated interest or roll it over and hold on to the money giving the lender an option of cashing in the CDS at any time without penalties. At times, agreements are made in advance on what to do exactly at maturity period, and at times it is left open, in which case the bank would hold on to the CDS money until the lenders cash it.

Before one finally opts to buy CDS and ties their money there, one should carefully look at the facts. Some of these facts are what the penalties for an early withdrawal would be; does the financial institution have the right to delay payment upon maturity? Is the interest paid periodically on just once upon maturity? Is there a liquid CDS feature which allows you to withdraw a portion of the principal?
Bear in mind that many financial institutions only pay interest rates that are many a times equal to the inflation rates, thus the true value of money is not increased. This interest may also be subjected to taxes. If one truly expects to earn money from the financial institutions, then you better think twice.