3 times a savings account can be better than a CD

In today’s high interest rate environment there aren’t many benefits that consumers can take advantage of. Rates are high enough for home buyers and owners looking to refinance. They also increased personal loans and credit cards, making borrowing with these two credit types significantly more expensive than a few years ago.

That said, the silver lining to higher interest rates is the money savers can now earn High yield savings And Certificate of Deposit (CD) Accounts The interest rates on these accounts are significantly higher than before – and can still be secured with what Regular savings account. But to earn maximum interest, depositors should first familiarize themselves with both the savings vehicles and the nuances of each. In particular, it helps to know when a savings account might be better than a CD and vice versa.

Start by exploring your savings account options here to see how much more money you can earn

3 times a savings account can be better than a CD

Here are three situations where a high-yield savings account can be better than a CD.

When you need access to funds

A CD comes as a great option for many people High interest rates That greater rate will be locked regardless of any volatility in the environment. But, again, they will locked up. To earn the full amount of interest on a CD you must keep your funds in the account for the entire fixed term. If you withdraw it early you may be charged a penalty, which usually comes in the form of interest you have earned to date, although each lender has different terms and policies.

If you want a higher interest rate but still want the freedom to deposit and withdraw, however, a CD may not be best for you. In this situation, you would be better served by opening a high-yield savings account. High-yield savings accounts are also safeBut they will allow you to continue your banking as usual, without any restrictions.

Explore your high-yield savings options and start earning more money now!

When you think rates can go higher

A positive feature of CDs is that the rate is locked in regardless of any negative activity during its tenure. So, for example, if you open a CD with a 4% interest rate, it will be honored throughout the term, even if the rate drops below that mark. But what if the rate is higher? In this case, you lose the interest you would have earned by keeping your money in a high-yield savings account instead. This is a real concern in today’s economy where rates have been raised 10 times from March 2022 – and they could go higher with the Fed’s next meeting after June.

Interest rates on high-yield savings accounts, meanwhile, is variable. If you open your account with a 3% rate but the Fed then raises it, you’ll automatically start earning interest at the new, higher rate. So, if you think rates are going to keep going up, you may be better served by sticking with a lower rate with a CD rather than moving your money into a higher-yielding account.

When you feel comfortable using an online bank

If you want the best interest rate on your high-yield savings account, consider finding one Online Bank. Online banks do not have the costs and overhead of banks with physical branches Instead, they have more savings, which they usually offer to savers in the form of higher interest rates. But you need to be comfortable using an online bank to secure this rate. This could mean making deposits and withdrawals from a bank with a physical location and then transferring the funds electronically to your high-yield account. But if you are comfortable using one Online Bank So the interest rate you can secure by doing this may be worth it compared to what you can get with a CD at a private bank or credit union.

You can now check your online high-yield savings account options here.

Bottom line

Both CDs and high-yield savings accounts have attractive features for savers in today’s rate environment. However, depending on your preferences, a high-yield account may be the better choice. This is especially true if you know you will need access to the funds you have deposited or if you think rates may rise in the near future. Likewise, if interest rates are your main motivator — and you’re comfortable using an online bank to secure that rate — a high-yield savings account may be better for you than a CD.