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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 |
|---|---|---|---|
|
5.25%
UFB Direct breaks balances into five tiers, but, currently, there is only one interest rate. |
No minimum deposit |
Open Account | |
|
0.50% - 4.60%
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 |
Open Account | |
|
5.05%
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 |
Open Account | |
|
4.65%
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 |
Open Account |
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
Say you open a five-year CD. You agree to leave the funds in the account for at least five years, until the CD reaches maturity. If you withdraw cash early, you may have to pay a withdrawal 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 September 2023 (also called the annual percentage yield or APY) was just 0.45% according to the FDIC.
Related Article
8 Easiest Bank Accounts to Open Online—No Deposit Required (2023)
Featured Certificate of Deposit
CIT Bank Term Certificates of Deposit
- Our Rating 3.5/5 How our ratings work Read the review
- Minimum
Deposit Required$1,000 - 1 Year APY0.30%
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%
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%
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
UFB Direct Secure Savings Account
- Our Rating 5/5 How our ratings work Read the review
- APY5.25%
UFB Direct breaks balances into five tiers, but, currently, there is only one interest rate.
- Minimum
Deposit RequiredN/A - Intro Bonus N/A
The UFB Direct Secure Savings Account has one of the highest interest rates we’ve seen for a high-yield savings account at up to 5.25% APY. Plus, there are no monthly fees and no minimum balance to open.
Overview
With one of the strongest high-yield savings interest rates on the market, as well as no monthly fees or minimum opening deposit, UFB Direct’s Secure Savings Account is an extremely attractive package.
Pros
- Strong interest rate
- No maintenance fees or minimum monthly balances
- Free complimentary ATM card
- Mobile app and SMS banking
Cons
- No signup bonus
- No associated checking account
Quontic Bank High Yield Savings Account
- Our Rating 3.5/5 How our ratings work Read the review
- APY4.50%
- Minimum
Deposit Required$100 - Intro Bonus N/A
Quontic High Yield Savings offers customers 4.50% APY, which is a moderately good rate for a high-yield savings account. There’s a low minimum of $100 to open your account, as well as no monthly fees, but as a digital-only bank Quontic does not have physical locations.
Overview
With a minimum opening deposit of $100, Quontic Bank’s High Yield Savings Account offers a flat 4.50% interest rate on all balances.
Pros
- Relatively strong interest rate
- No monthly maintenance fees
- Pay Ring for contactless payments
- Access to multiple ATM networks
Cons
- Minimum opening deposit required
- No physical branch locations
- Excess transaction fee for exceeding 6 transactions per statement cycle
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 |
How to Choose Between a CD and High-Yield Savings Account
Both CDs and high-yield savings accounts can offer a lot of value as savings vehicles to help you reach your financial goals.
You might 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.
You might 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.
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.
