CD vs. Savings Account: Which Is the Best Place for Your Savings Right Now?

After a few years of incredibly high rates, bank account APYs are expected to begin their descent within the coming weeks. The Federal Reserve is expected to initiate its first federal funds rate cut since 2020 this month, and bank account rates usually trend in the same direction.

You might be wondering about the best move for your money right now, and that depends a lot on your needs. Below, we'll talk about two of the most common options -- high-yield savings accounts and certificates of deposit (CDs) -- to help you decide which is right for you.

High-yield savings accounts: Easy access, variable rates

Savings accounts are the best place for your emergency savings and cash you plan to spend in the next couple of years. These accounts place few restrictions on when you can access your cash. 

A few banks still limit you to six free withdrawals per statement cycle, but this is no longer a federal requirement. Many banks today let you make more withdrawals and some even offer ATM cards so you don't have to first transfer the funds to a checking account.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of January 8, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of January 8, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

The downside to choosing a savings account for your cash is that their rates can change over time. This is a benefit when interest rates are climbing, as we've seen in recent years. 

But now, with rates likely to fall throughout the rest of the year into 2025, it's a drawback. You'll likely earn less on your savings account funds over the next year than you did over the previous year, and there's no telling exactly how low rates will go.

Choosing a high-yield savings account at least ensures you earn an above-average rate, even if they're not near today's highs. Many brick-and-mortar banks offer a 0.01% APY through good times and bad. But even when rates were at their lowest during the pandemic, high-yield savings accounts typically offered at least a 0.30% APY.

Certificates of deposit (CDs): Limited access, fixed rates

CDs could be more appealing for cash you don't need to spend in the next few years. Interest rates on these accounts are generally fixed at the time you open them, and they remain this way for the entire CD term. This could be months or years, depending on the account you choose. 

Opening a CD right now could help you earn a higher rate of return than you could with a high-yield savings account over the same period. But this isn't a smart move if you think you may need to access your cash before the CD term is up. 

You can take money out of a CD early, but you generally must withdraw all your funds at once. You'll also face an early withdrawal penalty equal to several months of interest payments. This could even cost you some of your principal if you withdraw the funds shortly after opening the CD.

If you decide to open a CD, compare CD rates from several banks and choose yours carefully. Pay attention to the early withdrawal penalty and make sure you're comfortable with this. Some CDs also have minimum deposit requirements that may prevent those with small balances from opening one.

It doesn't have to be one or the other

If you're having a tough time deciding, you may want to split your savings between the two. Put some money in a high-yield savings account where you can access it as needed and put the rest in a CD so you can hold onto those high interest rates.

You may want to act quickly if this is your strategy, though. Bank account rates could fall within weeks and this could limit the rate you're able to lock in on your CD.