In short, it all depends. Certificates of Deposit (CDs) and savings accounts are similar ways of storing your money, but they offer different benefits. A quick look at each will help you figure it all out.

Both savings accounts and CDs pay you interest on your money and are insured by the government as  long as they live at an FDIC bank (almost every bank is). In essence, they are both virtually risk-free investments – a pretty good deal. The only difference is their given interest rates and how often you can take your money out.

CDs typically pay higher interest rates than savings accounts, but you can’t withdraw your money whenever you want. CDs have set maturation time periods like three months, one year, five years, etc. where you cannot access your money (if you’re desperate then you can access your money by paying a hefty fine). The CDs with the longest maturation periods typically have higher interest rates, while those with shorter maturation periods have lower rates. Because of this, CDs are a great way to store money that you won’t use in the short-term while savings accounts are more for money you’ll want to spend sometime soon. Either way you go, you’re still getting paid to store your money, which is a pretty good thing.

Tags: CD, certificate of deposit, savings account