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A certificate of deposit (CD) or a high-yield savings account can be a great place to stash some cash for your short-term savings goals. With a little bit of savvy comparison shopping, you’re likely to find above-average interest rates with both account types, the vast majority of which are FDIC insured. But both CDs and high-yield savings accounts have their pros and cons. If you’re trying to decide which account type is best for you, here’s what you need to know about CDs vs. savings accounts so you can make a more informed decision.

Recommended High-Yield Savings Accounts

Bank Account APY Features Learn More
UFB Direct logo

UFB Direct Secure Savings Account

5.25% More Info

UFB Direct breaks balances into five tiers, but, currently, there is only one interest rate.

No minimum deposit
No monthly fee

SoFi Checking and Savings

0.50% - 4.60% More Info

Customers earn 4.60% APY on savings balances when they set up recurring monthly direct deposit of their paycheck or benefits provider via ACH deposit. Alternatively, deposit at least $5,000 each month to earn 4.60% APY on your savings balance. Checking balances earn 0.50% APY

No minimum deposit
No monthly fee

CIT Bank logo

CIT Bank Platinum Savings Account

5.05% More Info

Earn 5.05% APY on balances over $5,000. Balances of less than $5,000 earn 0.25% APY. Annual Percentage Yield is accurate as of July 27, 2023. Interest rates for the Platinum Savings account are variable and subject to change at any time without notice.

$100 minimum deposit
No monthly fee

CIT Bank logo

CIT Bank Savings Connect Account

4.65% More Info

Annual Percentage Yield is accurate as of July 27, 2023. Interest rates for the Savings Connect account are variable and subject to change at any time without notice.

$100 minimum deposit
No monthly fee

How Does a Certificate of Deposit Work?

A certificate of deposit is a type of deposit account you can open at most credit unions and banks, including many online banks.

What sets CDs apart from most other types of deposit accounts (e.g, checking accounts, savings accounts, high-yield savings accounts and money market accounts) are their restrictions. When you deposit cash into a CD, you agree not to withdraw those funds for a set period of time. This time frame is called the CD's term. A CD term could last anywhere from a few months to several years, depending on the account.

Quick Tip

If you open a five-year CD, you agree to leave the funds in the account for five years, until the CD reaches maturity. If you withdraw early, you may have to pay a penalty, which could offset some or all of the interest you earned.

 In exchange for agreeing not to touch your CD funds for a predetermined period of time, a bank or credit union may offer you higher interest rates. At the time of writing, some of the best CD rates are close to or even above 5.00% APY. By comparison, the average savings account interest in January 2024 (also called the annual percentage yield or APY) was just 0.47% according to the FDIC.

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Featured Certificate of Deposit

CIT Bank Term Certificates of Deposit

Open CD

Member FDIC

  • Our Rating 3.5/5 How our ratings work Read the review
  • Minimum
    Deposit Required
    $1,000
  • 1 Year APY0.30% More Info

    Annual Percentage Yield is accurate as of March 31, 2023. Interest rates for CIT Bank's term CDs are variable and subject to change at any time without notice

  • 3 Year APY0.40% More Info

    Annual Percentage Yield is accurate as of March 31, 2023. Interest rates for CIT Bank's term CDs are variable and subject to change at any time without notice

  • 6-Month APY5.00% More Info

    Annual Percentage Yield is accurate as of March 31, 2023. Interest rates for CIT Bank's term CDs are variable and subject to change at any time without notice

Many banks that offer CDs require customers to commit to lengthy terms of several years or more in order to earn the highest interest rates available. However, with CIT Bank's term CDs, the opposite is true. To get the best rates at CIT, you'll need to open one of its shorter-term CDs, such as its 6-month CD that pays 5.00% APY. If you want an easy way to save more money without having to wait years, CIT Bank's term CDs are a solid option.

Overview

If you’re looking for a dependable way to earn interest on your money in the short term, CIT Bank’s certificates of deposits may be an excellent choice for you. However, those looking to open a long-term CD may be better off looking elsewhere.

Pros

  • Strong rates for 13- and 18-month terms
  • FDIC insured

Cons

  • Rates for longer terms unimpressive

How Does a High-Yield Savings Account Work? 

A high-yield savings account typically pays higher-than-average interest on your money. At present, some of the best high-yield savings accounts also offer interest rates around or even beating 5.00% APY.

With a high-yield savings account, you deposit funds just like you would with any other savings account, paying attention to any minimum balance or opening deposit requirements. When you need to access funds, you can withdraw or transfer them online, depending on your account. 

Keep in mind that with savings accounts, your bank might limit the number of withdrawals you can make per month. You often can’t make more than six transfers or withdrawals from a high-yield savings account during a calendar month, though there may be some exceptions to this rule. 

Featured High-Yield Savings Accounts

Account APY Minimum deposit required Monthly maintenance fee Learn More
UFB Direct logo

UFB Direct Secure Savings Account

5.25% More Info

UFB Direct breaks balances into five tiers, but, currently, there is only one interest rate.

N/A $0

SoFi Checking and Savings

0.50% - 4.60% More Info

Customers earn 4.60% APY on savings balances when they set up recurring monthly direct deposit of their paycheck or benefits provider via ACH deposit. Alternatively, deposit at least $5,000 each month to earn 4.60% APY on your savings balance. Checking balances earn 0.50% APY

N/A $0

CDs vs. High-Yield Savings Accounts

Below is a side-by-side comparison of the benefits that CDs and high-yield savings accounts offer.

Certificates of Deposit High-Yield Savings Accounts

Penalties for early withdrawals

Traditionally up to 6 withdrawals per month

Some of the highest interest rates available

Typically higher-than average interest rates

Generally no monthly maintenance fees

May have monthly maintenance fees

Often FDIC insured up to $250,000

Often FDIC insured up to $250,000

Typically fixed rates

Rates may fluctuate with the market

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How to Choose Between a CD and High-Yield Savings Account

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Both CDs and high-yield savings accounts can offer a lot of value as savings vehicles to help you reach your financial goals. 

Consider opening a CD if you:

  • Are working toward long-term savings goals and know you won't need those funds for several months or years. You can also consider no-penalty CDs if you want flexibility to withdraw funds early, if needed, though APYs may be less generous. 
  • Want to minimize investment risk and avoid the volatility of the stock market. Consider discussing your options with a professional financial advisor first. 

Consider opening a high-yield savings account if you:

  • Need the flexibility to access your funds more frequently.
  • Are working toward short-term savings goals and don't want to lock away your money for an extended period of time.
  • Don't want to commit to a fixed interest rate because you're concerned about losing out on potential earnings if interest rates rise.

Bottom Line

Depending on the goals you're trying to accomplish, either a CD or a high-yield savings account might be a better fit than the other. Then again, no one lives in a vacuum. You could be trying to reach multiple financial goals at once. If that's the case, you might benefit from opening both types of accounts.

ML

Michelle Lambright Black

Michelle Black is founder of CreditWriter.com and HerCreditMatters.com. Michelle is a leading credit card journalist with over a decade and a half of experience in the financial industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting, small business, and debt eradication. Michelle is also a certified credit expert witness and personal finance writer.