Not sure whether a CD or high-yield savings account is right for you? While both accounts help keep your cash secure and allow you to earn interest on your savings, they have crucial differences. 

Here are some things to think through when deciding whether a CD or a high-yield savings account is the right choice for you and your financial goals.  

When to Choose a CD 

A certificate of deposit (CD) is a type of savings account that holds a set amount of money for a fixed time period, ranging anywhere from three months, to one year, to five years. Unlike savings accounts, you won’t be able to withdraw any cash from your account before the CD’s maturity date. Doing so typically results in fees that can offset any interest earned.

Usually, the rates on CDs are much higher than those on traditional savings accounts, and in many cases earn more than 4%. Further, interest rates are locked-in when opening a CD account, meaning if rates end up going down, your earnings won't be affected.

Before opening a CD, make sure to compare interest rates, early withdrawal penalties and the amount of time you’re willing to lock your cash away. 

Because your money is locked away for a set period of time in a CD, they aren’t good options for cash you might need access to, like an emergency fund. On the other hand, they’re good options if you’re saving for a particular goal, such as a future purchase. For example, if you know you’re going to buy a car in three years, opening a three-year CD can help build your savings with minimal effort, thanks to compound interest, and also help you resist the temptation to spend your cash. 

CDs are also a great option because they offer a fixed, predictable rate of return on your savings.

When to Choose a High-Yield Savings Account

A high-yield savings account functions in the same way as a traditional savings account, but with one main difference: high-yield savings accounts pay a higher than average APY on deposits. However, unlike CDs, the rates on high yield savings accounts are not fixed, meaning the rate you earn can fluctuate with the market. 

There’s no term length with a high-yield savings account, and funds in the account are accessible, so you won’t be charged a fee for withdrawing your cash. Because of this, high-yield savings accounts are better suited towards short-term savings goals or to save cash you may need to spend in the future, like an emergency fund

Since you won’t be making a singular up-front payment when opening the account, like with a CD, these accounts are useful for individuals looking to gradually save by making regular deposits into the account.  

Bottom Line on CD vs. High Yield Savings Account

Both a CD and high-yield savings account, can help keep your cash secure whilen earning interest. However, high-yield savings accounts offer more flexibility when it comes to managing your cash. You won't have to wait until the maturity date on the account before withdrawing funds, and you can add to the account whenever you like, unlike with a CD. 

However, the downside is that you can't lock in rates when opening a high-yield savings account. With a CD, the APY on the account stays the same from when it's opened until it matures. If rates go down, your earning potential won't be decreased, but it will, however, if your funds are in a high-yield savings account. 

This article was written by Erin Bendig from Kiplinger and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to

The opinions expressed within this article is that of Erin Bendig and not that of M&T Bank, nor does M&T Bank endorse the opinions.

This article is not intended to provide tax, legal, accounting, financial, or other professional advice. Always consult a qualified professional about your personal situation.