CDs VS Savings Accounts

So you’re sitting on some cash and you’re wondering whether to put it in a CD or savings account. With certificates of deposit and savings account rates being so low it might not make a difference where you put your cash right now. But, we’ll discuss as there are some advantages and disadvantages to each option.

Certificates of Deposit

You’re going to want to ask yourself if you’re going to need the cash anytime soon. Depositing your cash into a CD will lock up your money for some time. Most CDs can be purchased in fixed terms such as 3 months, 6 months and 1 year. Meaning, that your money would be locked up for that time frame and in exchange you would recieve an above average interest rate that is guaranteed by the FDIC.

Most banks or brokerages will charge a penalty if you withdraw or cash out the CD prior to the end of the term. This will impact any interest earned as the fee would likely be greater than any interest earned. Point being, is that you need to make sure that you’re not going to need the money prior to the end of the term.

Savings Account

Putting your money to work in a savings account can also generate a solid interest payment every month without having to lock up your money. In most times, you’ll get a rate that’s generally lower than a CD but without having to lock up your money. This would likely benefit those that want to earn a great interest rate but want to make sure to have immediate access to their cash.

You’re going to have to be careful because some banks do charge monthly fees and have account balance minimums that will impact interest earned. In addition, you’ll have easy access to your money, which for some, including myself makes it very challenging to save money.

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