A CD is 4 times better than a savings account

Even if today’s high interest rates can cost you in other areas of your financial life—from steep credit card rates to expensive auto and personal loans—one area where You can still benefit Your savings are.

High-yield savings APYs are now above 4% APY and even closer to 5%. But when High Yield Savings Account This is a great place to find those high rates (and offers a lot of flexibility in accessing your cash). Certificate of Deposit (CD) May be better for some savers.

There are many CDs Benefits for savers Want to maximize interest income as long as possible. Below, we’ve outlined four scenarios to help you decide when a CD might be a good savings option.

Learn more about how a CD can help you save more and compare today’s top rates.

A CD is 4 times better than a savings account

Here are some times when you might want to choose a CD over a savings account:

You want to score the highest rate available

right now, Short term CDs Some offer the highest interest rates out there.

Some top CDs offer shorter durations (about six months to a year). More than 5% APYWith some reaching as high 5.20% APY and higher. Long-term CDs (those with maturities of three to five years or more), on the other hand, typically earn around 4.20% to 4.30% APY. Similar to that High Yield Savings AccountThat yields between 4% and 4.50% today, though some standout options can go Max 4.85% APY.

Even outside of today’s unique rate environment, CDs offer higher APYs than savings accounts. Because they want you to lock in your money for the entire term, you can usually score a slightly higher rate than more accessible accounts — including high-yield savings accounts.

Compare some of the top CD accounts here and lock in higher rates!

When rates can go down

CDs carry fixed interest rates, meaning the rate you lock in once you open it won’t change throughout the CD’s term. This can be a big advantage if you believe that interest rates are likely to drop in the near future.

“Even if an investor misses the top spot, they’re very happy to get levels above 5% for select CDs right now,” says Mike Bigica, CFP, founder of Pixel Financial Planning.

Despite ongoing speculation about The Fed’s next move, it is impossible to predict exactly when the Fed will cut rates and when banks will respond by cutting their own rates. But we know that interest rates cannot stay this high forever. So if you think rates may drop sometime in the near future, you may benefit by locking in a fixed CD rate today instead of a variable savings account rate.

When you have a plan for the CD ladder

CD ladder This is a popular strategy where you can split your savings balance between multiple CDs that mature at different times. Today, a CD ladder can help you take advantage of very high short-term CD rates while also locking in solid rates. long term. Then, you can choose to continue rolling your money into new CDs until they mature, as long as the rate is higher.

You can’t ladder savings account rates the same way — high-yield savings accounts carry variable rates, so when you open them they surprisingly don’t have the same benefits as CDs.

“CDs protect against interest rate fluctuations, where savings accounts don’t,” says Steve Schleupner, CFP, founder of U Tree Financial Planning. “I like the idea of ​​mixing the two in a way that has a short-term emergency fund in high-yield savings backed by a CD ladder.”

When you don’t want to spend money

A major downside of CDs, early withdrawal penalty fees, can actually be an advantage for some savers.

If you have one specific goals Keeping track of the money you put into your CD — such as a future down payment or to cover a child’s college expenses — can help you avoid spending money on other, more emotional things before your savings period ends.

Although extremely fluid High Yield Savings Account While great for emergency funds that you may need to access at short notice, not being able to access the money you save in a CD can be a key factor in helping you finally reach your savings goals.

Explore all the best CD options right here and start saving your money.

Bottom line

inside Today’s economic environmentThere are plenty of reasons to consider saving with a CD. High Yield Savings Account Helpful for your emergency savings and other money you want quick access to — but there are times when a CD might be better for your personal goals. Whether your goal is to maximize the best rate for as long as possible, start a CD laddering strategy, or add an extra layer of protection between your money and your motivation to spend it, a CD can be a key tool to help you save more today. can .

Get started by comparing the best CD rates available to you here