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CD vs savings: Which is best for me?

Should you keep your money accessible or lock it away in exchange for a higher APY?

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 savings accounts give you access to your money while the CDs lock it away until a set date.

What’s the difference between a CD vs. savings account?

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:

CDsSavings accounts
Interest ratesHigherLower
ATM accessNoSometimes
FDIC or NCUA insuranceYesYes
Minimum depositsHigherLower
Ability to access fundsNoYes
Withdrawal penaltyYes. 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.

Pros and cons of CDs

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:

CD pros

  • High APYs. CDs typically have higher APYs than savings accounts, and the longer the CD term, the higher the interest rate.
  • No fees. Unlike savings accounts, CDs have no monthly fees or service charges because you can’t touch the funds until the term is up.
  • Flexible terms. Terms usually range from 12 months to 10 years, but some institutions may offer CDs with shorter or longer terms.
  • Locked-in rate. Your rate never changes with a CD, so you don’t have to worry about losing money if interest rates drop.

CD cons

  • Can’t access funds. Your money is locked away in a CD, and you’ll pay an early withdrawal penalty if you need to access it before maturity.
  • Higher minimum deposits. Minimum deposits vary, but most CDs have higher requirements than savings accounts.
  • No additional deposits. Once you open a CD, you can’t make any changes to the account, including adding more money.

Pros and cons of savings accounts

A savings account gives you limited monthly access to your money and carries the following benefits and disadvantages:

Savings account pros

  • More features. Unlike CDs, savings accounts offer ATM cards, mobile banking, direct deposit and more.
  • Lower minimum balances. Savings accounts have lower minimum balances than CDs.
  • Easy access. You can deposit or withdraw money into a savings account at any time.

Savings account cons

  • Lower APYs. You have monthly access to your money, but this benefit comes at the cost of lower APYs.
  • Monthly fees. Some banks may charge fees to maintain your account every month.
  • Excess withdrawal penalty. You’ll typically pay a fee if you make more than six withdrawals a month. But some banks are temporarily waiving this fee due to the coronavirus pandemic.
  • Interest rates fluctuate. Unlike CDs, your interest rate isn’t locked in, so you could earn more or less money if rates change.

CDs vs. savings accounts: Which one should I choose?

While you can earn interest and save money with both a CD and a savings account, the one you should choose depends on how soon you want to access your cash.

  • Choose a CD if you don’t need the cash until the future and want a higher interest rate.
  • Choose a savings account if you want to access your cash regularly and add funds whenever you want.

Compare top-rated CDs and savings accounts

Name Product Annual percentage yield (APY) Fee Minimum deposit to open
Aspiration Spend & Save Account
Finder Rating: 4.2 / 5: ★★★★★
Aspiration Spend & Save Account
$0 per month or $7.99 per month for Aspiration Plus ($5.99 per month if you pay annually)
Deposits are fossil fuel-free. A spend and save combo account with unlimited cash back rewards and deposits insured by the FDIC and a $100 bonus when you spend $1,000 in your first 60 days.
Quontic Bank High Yield Savings
Finder Rating: 4.6 / 5: ★★★★★
Quontic Bank High Yield Savings
Interest is compounded daily. No monthly service fees. Competitive rates
Axos Bank High Yield Savings
Finder Rating: 4 / 5: ★★★★★
Axos Bank High Yield Savings
No monthly maintenance fees. No minimum balance requirements. Interest compounded daily.
American Express® High Yield Savings
Finder Rating: 4.6 / 5: ★★★★★
American Express® High Yield Savings
Enjoy no monthly fees and a competitive APY with this online-only savings account. Accounts offered by American Express National Bank, Member FDIC.
Gemini Earn
Gemini Earn
Up to 8.05%
Watch your cryptocurrency earn up to 8.05% APY with this nationwide account. Not FDIC insured.
Ponce Bank Money Market Deposit
Finder Rating: 4 / 5: ★★★★★
 Ponce Bank Money Market Deposit
Ponce Bank Money Market Deposit account, offered through SaveBetter, has a $1 opening deposit and earns 0.41% APY.

Compare up to 4 providers

Name Product 1-year APY 18-month APY 2-year APY 3-year APY 5-year APY
Quontic Bank CD
Lock in a high rate. Minimum of $500 required to open. Open your account in 3 minutes or less
State Exchange Bank CD
Locally-owned independent community bank. FDIC insured. No fees.
CIT Bank Term CDs
Choose from a range of terms with no maintenance fees and $1,000 minimum to open.

Compare up to 4 providers

4 ways to compare a CD vs. savings account

As you shop around for CDs and savings accounts, keep these factors in mind:

1. Interest rates

When you open a CD, you agree to let the bank lock your money away until a certain date. A locked-in agreement means the bank offers you a higher interest rate in return.

If you know you won’t need the money for more than 12 months, a CD is a good option. But if you’re looking for a place to store your emergency fund, a savings account is a better fit.

2. Fees

Savings accounts have higher fees than CDs because you have 24/7 access to your money. But many banks will waive the fee if you meet certain requirements, and others don’t charge a fee at all.

3. Minimum deposits

CDs have higher minimum deposits than savings accounts. Although these vary by financial institution, they could be as low as $0 and as high as $100,000 if you’re looking into a Jumbo CD.

4. Features

CDs are completely off-limits until maturity, so don’t expect many features. At most, you may find one that lets you deposit additional funds or transfer interest payouts to another account.

If you’re looking to withdraw money from an ATM, make direct deposits or manage your account from your phone, a savings account is a better option.

Bottom line

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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