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CDs and savings accounts were designed with the same purpose in mind — to help you save money. They both offer guaranteed returns and earn you some interest, but one gives you access to your money while the other locks it away until a set date.
Nearly every bank and credit union nationwide offers CDs and savings accounts. They both help you reach your savings goals, but keep these differences in mind:
CDs | Savings accounts | |
---|---|---|
Interest rates | Higher | Lower |
ATM access | No | Yes |
FDIC or NCUA insurance | Yes | Yes |
Minimum deposits | Higher | Lower |
Ability to access funds | No | Yes |
Withdrawal penalty | Yes. You’ll typically pay a penalty fee if you access your funds before maturity. | Yes. You’ll typically pay a penalty fee if you make more than six monthly withdrawals. |
When you open a CD, you agree to lock your money away until it reaches maturity. This type of account carries the following benefits and disadvantages:
A savings account gives you limited monthly access to your money and carries the following benefits and disadvantages:
As you shop around for CDs and savings accounts, keep these factors in mind:
Choose a savings account if you need monthly access to your money or are looking for a place to stash your emergency fund. You’re limited to six monthly transactions, but you can make as many deposits as you’d like and some accounts come with an ATM card.
If you’re certain you won’t need the money for a while and want to earn more, choose a CD. The APY is typically higher than savings accounts, but you’ll pay a hefty fee if you need the money before the term is up.
Once you decide which account you want to go with, either shop around for high-yield savings accounts or compare top-rated CDs.
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