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Is a Certificate of Deposit Better Than a Savings Account?

June 16th, 2023 | 9 min. read

Is a Certificate of Deposit Better Than a Savings Account?

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Great question! Saving money is one of the smartest things you can do with your cash, but with endless options, it can be tricky to know what type of account is the best fit for you. Enter the epic battle of Certificates of Deposit (CDs) versus savings accounts.



Via Giphy

Think of it like a video game – which character will help you win? While both offer a way to level up your cash stash, they have their own strengths and weaknesses. Understanding the differences between them will score you points in the money game and help you choose the best strategy to reach your financial goals.

Let’s dive into the world of CDs and savings accounts – and may the odds be ever in your bank account's favor.

here's a closer look at what we'll cover


Law-Iconcd vs savings: what are the differences?

certificate of deposit accounts 
Certificate of Deposit (CD) offers a higher interest rate than savings accounts which means your money will grow faster over time. They work by having you deposit a certain amount of money into the account for a set period of time; after which, you can either withdraw your money  or renew your CD for another fixed duration.

QUICK TIP: Need to take a step back and learn more about CDs? Here's Everything You Need To Know about CDs >

savings accounts

Savings Accounts are one of the most widely used types of deposit accounts available.

It’s a great option for people who want to regularly save money over time, with zero to minimal fees and few restrictions. There is no fixed term, which means that account holders can deposit and withdraw money at any time (Psst.... keep in mind that withdrawing funds from a savings account may defeat the purpose of saving money).Interest rates on savings accounts are typically lower too compared to CDs but offer more flexibility.

Want to know more about savings accounts and which would be right for you? Here's a detailed look at all the saving account types and which one may be best for your saving needs.

How to Choose the Best Savings Account



what are cd accounts used for? 

CD accounts are best suited for individuals who have a specific financial goal with a set time frame and can afford to not touch their funds for a certain amount of time (the term). This makes them a great option for those saving for:

  • Retirement
  • Saving for a child's education
  • Saving for a future down payment on a house or another large purchase


what are savings accounts used for?

Savings accounts are ideal for individuals who want to set aside money for short-term goals. Many people use savings accounts for:

•    Building an emergency fund
•    Saving for a vacation
•    Making a down payment on a car

With the flexibility of a savings account, you have immediate access to your funds whenever necessary.


Rates-Icon---whitehow are cd rates determined? 

 CD rates are primarily determined by the financial institution issuing the CD and prevailing market conditions. Banks and credit unions consider factors such as their lending and borrowing needs, operating costs, and competitive landscape when setting CD rates.

Additionally, CD rates are influenced by broader economic factors, including

  • The federal funds rate set by the Federal Reserve
  • Inflation expectations
  •  Overall market demand for CDs 

bubble-putting-cents-in-piggyTypically, longer-term CDs offer higher interest rates, as financial institutions aim to incentivize customers to invest their money for extended periods.

Psst... It's essential to compare CD rates from different institutions to find the best available option, as banks and credit unions may offer varying rates based on their unique financial circumstances and objectives.

Skyla's CD Rates


Savings-Icon-whitehow are interest rates determined for savings accounts? 

Interest rates for savings accounts are primarily influenced by the federal funds rate, which is set by the Federal Reserve. When the federal funds rate increases, banks and credit unions typically adjust their savings account interest rates accordingly.

However, the specific interest rate offered on a savings account can vary between financial institutions, as they consider factors such as:

•    Operational costs
•    Profit margins
•    Competition in the market

It is essential for you to shop around and compare the interest rates offered by different banks and credit unions to find the best savings account option that meets your financial goals and requirements.

Skyla’s Savings Rates



how can i get the most out of my account?


CD Laddering

One strategy is to consider opening multiple CDs with different maturity lengths (i.e.1-year, 2-year, and 3-year terms). This approach allows you to benefit from higher interest rates typically offered by longer-term CDs while maintaining regular access to your money as each CD matures.

As each CD reaches its maturity date, you'll have the option to either put your funds into a new CD or withdraw the money if needed. This strategy helps you create a balance between earning higher interest and maintaining liquidity for your financial needs.


Rainy-day savings

Combining a regular savings account with a CD can be an effective way to maximize your savings while ensuring you have readily available funds for emergencies. To implement this strategy, maintain a "rainy day" fund in a regular savings account with a small amount of money that can be easily accessed without penalties and use the rest of your savings in CDs to earn higher interest rates.

This approach allows you to benefit from both the higher interest earnings of CDs and the liquidity of a regular savings account. In case of unexpected expenses or emergencies, you can tap into your rainy-day fund without disrupting your long-term savings goals and CD investments.



Via Giphy

when to consider a savings account: 

You want flexibility in accessing your funds.

You're saving for short-term goals.


when to consider a cd account: 

You have a set financial goal with a specific time frame...


You want to earn a higher interest rate.


Here's a better look at how much one can earn with a savings account compared to a regular savings account over the span of 5 years. Psst... hover over the "i"  to learn what's APY. 

certificate of deposit accounts (4.00 APY) APY = Annual Percentage Yield
regular savings accounts (0.25% APY) APY = Annual Percentage Yield
year 1
year 2
year 3
year 4
year 5

*Theses figures are for demonstrative purposes only.


bubble-growing-moneyIn this example, the chart illustrates the growth of a $5,000 investment in a CD with a 4.00% APY* and a regular savings with a 0.25% APY* over a period of 5 years. Both CD accounts and regular savings account columns display the value of the funds invested at the end of each year. These calculations assume that the interest is compounded annually. 


Psst... Keep in mind that the compounding interest for a CD and regular savings account can vary depending on the specific terms and conditions set by the financial institution. 

Want to calculate your savings to see how much you can earn? Here's Skyla's Calculator. 

Start Calculating

ready to see how your money can grow?

Both CDs and regular savings accounts can play important roles in an individual's financial strategy. Assess your financial goals and determine which type of account best aligns with your needs.

With a strong understanding of the differences between CDs and savings accounts, you can make informed decisions and confidently watch your money grow.

Don't forget to always keep an eye on current interest rates and explore the offerings of different financial institutions to ensure that you're getting the most out of your hard-earned cash. 

Still questioning whether to get a CD or need to know if CD's are safe? I have just the thing. 

Are CDs Safe?


If you have any questions, any of the wonderful staff at your local Skyla branch will be more than happy to help! Not near a branch or short on time? Then simply send us an email or give us a call at 704.375.0183. 




As the Content Specialist and author of the Learning & Guidance Center, Yanna enjoys motivating others by uncovering all that's possible in the world of finance. From financial tips and tricks to ultimate guides and comparison charts, she is obsessed with finding ways to help readers excel in their journey towards financial freedom.


more resources to help your money grow

Is a Certificate of Deposit Better than a Money Market Account?

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Everything You Need to Know About Certificate of Deposit Accounts

What is a certificate of deposit account? Here's what you need to know so you can determine if this saving option is right for you. 

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