Because CD rates are so strong right now, and because interest rates are also expected to start falling pretty soon, you may be inclined to open a CD this September. Doing so could mean snagging a 5.00% APY on your money, or somewhere in that ballpark.
With a savings account, you may be looking at a lower interest rate to begin with. And also, your rate is never guaranteed to stay the same with a savings account. In spite of this, you may want to choose a savings account over a CD for these key reasons.
1. You can earn more interest with a savings account under the right circumstances
Because interest rates are expected to fall in late 2024 as well as 2025, right now, you’ll probably earn more money with a CD than a savings account. But that’s not always the case. And in certain situations, you might earn more with a savings account.
Say you lock in a 12-month, $5,000 CD at a 3.00% APY. That means you’re guaranteed to earn $150 in interest. But what if shortly after you do that, interest rates start rising, and you miss the chance to earn 3.50% on your money? That means you could’ve earned about $175 instead.
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings 
APY 4.25%
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APY 4.25%
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Min. to earn $0 |
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CIT Platinum Savings 
APY 4.85% APY for balances of $5,000 or more
Min. to earn $100 to open account, $5,000 for max APY
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APY 4.85% APY for balances of $5,000 or more
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Min. to earn $100 to open account, $5,000 for max APY |
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American Express® High Yield Savings 
APY 4.25%
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APY 4.25%
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Min. to earn $0 |
Again, this example doesn’t apply to our current interest rate environment. But it could happen in general.
2. You can more easily jump on investment opportunities
Because CDs give you a guaranteed interest rate on your money, they commonly impose penalties for taking an early withdrawal. And that could get in the way of taking advantage of other money-making opportunities.
Say the stock market takes a tumble and stock values fall across the board. That gives you an opportunity to scoop up shares at a discount.
If you have your money tied up in a CD, you may be inclined to pass up that investment opportunity to avoid the financial hit of an early withdrawal penalty. But in doing so, you could miss the chance to buy quality stocks at a lower price and see your portfolio gain a lot of value through the years.
With a savings account, your money is yours to withdraw whenever you feel like it. So in a situation like this, you’d be free to put some of your cash into stocks
3. You might get more peace of mind
It’s true that you might earn more money with a CD than with a savings account. Plus, with a CD, you get the security of knowing exactly how much interest you’ll earn. But because a savings account gives you more flexibility with your money, it may give you more peace of mind.
You may decide to open a CD once you feel you’re all set with emergency savings. But what if there’s that nagging thought in the back of your mind that you may have underestimated your emergency fund needs?
That line of thinking could cause you to lose sleep. And that may not be worth it when you could instead choose to keep your money in a savings account. What you might lose in interest, you might gain in the form of fewer worries. Plus, you may find that the difference between what a savings account pays you in interest vs. a CD isn’t worth the stress.
Say you have $5,000 you’re thinking of putting into a 12-month CD with a 5.00% APY. That’s a guaranteed $250 in interest.
With a savings account, you might start off earning 4.50% or 4.25% interest only to see your rate tick downward toward 3.00% over the next year. But let’s say you earn 3.50% on your money all-in instead of 5.00%. That gives you $175.
So yes, you’re earning $75 less than you would with a CD in this example. But is $75 worth 365 days of worrying? Probably not.
There’s nothing wrong with putting money into a CD. But before you do, consider the upside of choosing a savings account instead.
