Are Savings Accounts better than Certificates of Deposits?

Savings accounts and certificates of deposits are good financial investment portfolios where you can just sit back and relax while you let your money work for you. However, before you make any final decisions in choosing between a savings account and a certificate of deposit, it would be wise to weigh in and take into account a few consideration here and there.

Savings accounts and certificate of deposits have some similarities. A savings account or a certificate of deposit allows you to earn  interest. You can open a savings account or you can open a CD at your bank within minutes. Both of these financial instruments are covered by FDIC  insurance. As such, you can trust your money is protected when the bank fails.

Although savings accounts and certificate of deposits are similar in some points, they differ in some aspects too.

  1. The interest rate that you earn on your savings account is lesser than the interest rate on your CD.
  2. You can invest starting a small amount on a savings account while on a CD, it requires a minimum amount.
  3. While a savings account lets you add money from time to time and allows you to withdraw anytime you need your money, a certificate of deposit does not. Once you put a certain amount on a certificate of deposit, you can only withdraw the money upon maturity unless you want to pay a certain penalty for early withdrawal. In other words, certificate of deposits carry fixed interest rates and are held for a specified length of time like six months, one year, five years or even 10 years. You make a commitment that it stays in the bank for a particular period of time. On the other hand, if you make premature withdrawals on your CD you have to pay penalties.
  4. Savings accounts can be linked to checking accounts and transfer can be made between them.
  5. With a certificate of deposit, the longer the term the higher the return and, usually, the rate is much higher than a savings account. You can compare some of the best certificate of deposit rates offered by well known financial institutions. It all depends on the amount you put into your account. Needless to say, the bigger the amount the more interest you will get.

So, what is the best for you?

In making decisions on where to put your hard-earned cash, whether on a Savings Account or on a Certificate of Deposit, you must sit down and think. Take a look at you financial situation. Any investing decision depends largely on your financial need in the future.You must make your decisions for yourself. Choose the one that suits your needs.

By putting your money into online savings account you will be able to earn a significant amount in a relatively short time without having to wait a number of years before you start to see the number in your account to grow and it is readily available whenever you need it. If you need quick cash, you can withdraw through ATMs. ATM is one of the most financially-beneficial options for those who want to store away money for emergency situations.

However, if you have money and you can afford to let your money stay for a long period of time, it is better to invest in CD’s rather than putting your money in a safe or a vault without earning interest.

If you want to choose CD’s, ask to see the maturity date in writing. Many individuals fail to confirm the maturity dates for their CD’s and are later shocked to learn that they have tied up their money for five years, ten years and even more. Think carefully the amount of your CD purchase.

Online investing today is very common because of its simplicity. The safest choice is to educate yourself about your options because the CD with the highest yield may not be the right one for you.

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