CD vs. Savings Account: Which Should I Choose?

You might be wondering whether it’s better to put your money into a CD or a savings account. CDs and savings accounts both offer a great way to reliably earn interest on your money while avoiding riskier investment options.

But which one is better?

Here are some pros and cons to putting money into a savings account or certificate of deposit (CD).

CD vs. Savings Account: Pros and Cons

Savings accounts.

You can easily withdraw your money at any time without penalty. (Certain restrictions apply based on your financial institution’s policy put into place to follow Regulation D requirements). The interest rate is often very low but typically stands at a fixed rate.

CDs.

A certificate of deposit comes in terms (predetermined maturation dates). You cannot withdraw your money until a certain point without paying a fee. The interest rates are slightly higher, and the APY typically stays the same across the term of the CD. 

What is a CD?

It’s a type of savings account. A certificate of deposit is a lump sum of money offered to the bank or credit union for a period of time. There are short-term CDs, mid-range CDs, and long-term CDs, whose rates can range from a few months to over 10 years.

Types of CDs

• Traditional CD: At BluCurrent, we offer a traditional CD. You can choose between a short-term (as little as 6 months) or a long-term option (as long as 60 months). Typically, the longer the term, the higher the yield of return. This investment choice has a fee for withdrawing money early.
• Brokered CD: These CDs aren’t sold by credit unions or banks, but by third-party deposit brokers. They carry a higher interest rate and are therefore riskier. They aren’t insured or backed by federal or state agencies.
• Callable CD: This type of CD allows the bank to “call” it and reissue your investment to you, along with any accrued interest. Once withdrawn, you will have to find a new CD account to transfer the money to. BluCurrent does not offer this.

Benefits of Opening a Certificate of Deposit

You’ll (typically) earn higher returns than you would with a traditional savings account and you’ll get more predictable returns than most other investment options.

You can also opt for a CD ladder. It’s an investment strategy where you invest in multiple CDs at varying term lengths, be it 1-year, 5-year, etc. This way, you can access your investments along the way.

What is a Savings Account?

Savings accounts are often better places to store your money than a checking account, simply because you can accrue some interest on your money. The annual percentage yield (rate) is often lower than a CD.

There are three types of savings accounts to consider:

• Traditional savings accounts (offers low-interest rates but typically no monthly fees)
• High-yield savings accounts (offered only at online banks)
• Specialty savings accounts (cash savings accounts, custodial accounts, IRAs)

With a savings account, your money is more accessible than with a CD. The account can also be managed online or through a mobile app.

Types of Savings Accounts

Savings accounts come in three forms: a money market account, a certificate of deposit, and a traditional savings account.

Traditional savings accounts are generally great for the four primary types of savings:

• Emergency savings
• Goal savings
• Spending savings
• Long-term savings

Benefits of Opening a Savings Account

It offers a safe place to put your money and you can typically earn more interest than you would with a checking account. Most financial institutions don’t require you to have a large deposit to open an account.

Your money is also accessible at any time and can be transferred back and forth between checking and savings accounts as needed. Be sure to check with your financial institution for any maximum monthly transfer or withdraw restrictions, put into place to follow Regulation D requirements.  

How to Open a Savings Account with BluCurrent

At BluCurrent, you can open a savings account quickly & conveniently through video banking. You just need a few things to get started:

• Your social security number
• Photo identification
• A $5 minimum deposit

If you are already a member at BluCurrent, you can open another savings account directly within online or mobile banking.

How to Open a Certificate of Deposit with BluCurrent

If you decide that a CD is a better option, opening a certificate of deposit with BluCurrent is also simple. You’ll first need to ensure you have the $1,000 minimum deposit to open a BluCurrent CD. Then, pick the term of CD you want (which is how many months or years you want to collect interest). Term rates & information can be found on our certificate of deposit page.

Next, launch a video banking call to get your CD opened! If you have the minimum $1,000 deposit in your BluCurrent Account, you can simply open your CD directly within online or mobile banking.

Bank with BluCurrent Credit Union Today

We’re a community-minded credit union that works to help our members with any and all questions concerning their accounts. Contact us for more information about becoming a member, opening a deposit account, and investing today.