Savings account or CD: Which is right for you?

Have money to set aside and save for your short- and long-term goals? Savings accounts and certificates of deposit (CDs) are two great options. Both help keep your money safe while giving you the chance to earn interest. Break them down to figure out what’s right for you.

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How they work

Savings accounts 
Deposits are FDIC-insured, and you can withdraw your money when you want—in some cases with an ATM card. Note: Federal laws limit the number of certain types of transactions. Some accounts have maintenance fees, though they may be waived under certain conditions.

CDs 
Accounts are also FDIC-insured but less accessible. You agree to keep your money in the CD for a set amount of time—9 months, 12 months, 24 months or longer. If you access your funds before the maturity date, you may pay a penalty. Usually, there are no fees to open or maintain a CD.

Interest earned in each

A relatively low, variable interest rate. Money market or certain savings accounts may offer higher rates based on your balance.

A fixed interest rate that is typically higher than savings accounts.

Minimum balance to open

Varies, but may be lower than a CD. At Bank of America, it’s $100.

Varies, but generally higher than a savings account. At Bank of America, it’s $1,000.

Ways to use them
A savings account offers easier access to your money, which can be useful in case of emergencies. CDs are helpful for longer-term planning and can offer higher interest rates. Here’s an example of what makes sense for different situations and savings needs.

Savings account
Certificate of deposit

Short-term
When you need your money
Long-term

Emergency fund
Day-to-day savings
Teaching your child to save
Vacation in 3 months
Big purchase in 6 months
Gift money for a child
Next year’s tuition
Part of your retirement savings
Future down payment

Use them both to your advantage
You don’t have to choose one or the other. It may make sense to have both a savings account and a CD as part of your overall savings plan.

Learn more about your savings options from Bank of America, including Rewards Savings accounts, CD accounts and child savings accounts.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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