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: There may be limits on the number of transactions permitted. Some accounts have maintenance fees, though they may be waived under certain conditions.

Interest earned in each
A relatively low variable interest rate. Certain savings accounts may offer higher rates based on your balance.

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

CDs
Accounts are also FDIC-insured but less accessible. You agree to keep your money in the CD for a set amount of time—7 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 fixed interest rate that is typically higher than savings accounts.

Minimum balance to open
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
Short-term
Emergency fund
Day-to-day savings
Teaching your child to save
Vacation in 3 months

When you need your money
Big purchase in 6 months

Certificate of deposit
Long-term
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.