If you have some money that you need to put somewhere while you save it for short- or medium-term goals, you have two primary choices: a high-yield savings account or a certificate of deposit (CD).
Many people default to savings accounts, probably because they just seem simpler and more common. This could be a mistake, though. CDs actually have three unexpected advantages over savings accounts that are worth considering before you decide where your money will go.
1. CDs often pay higher rates
Right now, CD and savings account rates are pretty comparable, and there have been times recently when high-yield savings accounts even provided higher yields than CDs.
Traditionally, though, CDs do have a little bit of an edge on the interest they pay. If you can squeak out some extra money on the money you’re saving for your goals, that only helps you out — and there’s no reason not to try to maximize your yields.
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings  APY 4.00% Rate info Min. to earn $0 Member FDIC. |
APY 4.00% Rate info |
Min. to earn $0 |
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American Express® High Yield Savings  APY 4.00% Rate info Min. to earn $0 Member FDIC. |
APY 4.00% Rate info |
Min. to earn $0 |
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CIT Platinum Savings  APY 4.70% APY for balances of $5,000 or more Rate info Min. to earn $100 to open account, $5,000 for max APY Member FDIC. |
APY 4.70% APY for balances of $5,000 or more Rate info |
Min. to earn $100 to open account, $5,000 for max APY |
Ready to check out CDs? Click here for the best CD rates available right now.
2. CDs lock in your rate
There’s another huge benefit to CDs, especially right now. The rate you get on the CD is fixed for the duration of the CD term. But the rate on a high-yield savings account is variable.
This means that while some great savings accounts are paying really competitive yields right now, that may not last for long — especially as the Federal Reserve (the U.S. Central Bank) is widely expected to lower its benchmark interest rate again before the end of the year and then drop it again several more times throughout 2025.
If you put your money into a CD now, you can guarantee you’ll get to earn today’s rate for at least a few months or a few years, depending on the duration of the CD you pick. Plus, in general, any time you buy a CD, you know upfront what you’re getting. This allows you to estimate savings goals more accurately than when you have the uncertainty that comes with a variable rate.
3. CDs encourage you to stay invested
There’s one last unexpected advantage, and this one may surprise you. One of the best things about CDs is that they essentially force you to lock up your money.
This is often painted as a downside, since CDs do this by penalizing you if you take out money before the CD term ends. But that’s a problem only if you put money into CDs that you shouldn’t.
If you may need to access the funds sooner than the maturity date of the CD, then that money should definitely be in a savings account. You can check out our picks of the best high-yield savings accounts to find one. But if you know you’ll be leaving your money alone because you’re saving it for a future goal, then these penalties are actually a positive thing.
When you’re told you can’t access your money out without incurring a fee, you’re less likely to take it out. You won’t be tempted to use it on something else besides saving for the goal you’ve earmarked the funds for. That’s potentially a big benefit.
For all of these reasons, you should seriously think about putting money into a high-yield CD rather than a savings account if you’re saving for a goal that’s at least a few months away. These benefits could really pay off big time for you.
