Two secure ways to grow your money—and when to use each one
When it comes to saving money, where you park your cash can matter almost as much as how much you save. A dollar tucked away today can quietly multiply tomorrow—if it's earning a solid rate of interest. That's why many savers look beyond the traditional savings account and turn instead to high yield savings accounts or certificates of deposit (CDs).
Both are low-risk, interest-bearing ways to grow your money while keeping it safe—but they play by different rules. This guide will walk you through how high yield savings accounts and CDs work, how they differ and how to decide which deserves a spot in your financial lineup.
What Are High Yield Savings Accounts?
A high yield savings account is the overachieving sibling of the standard savings account—same family, better performance. While a traditional savings account might earn a fraction of a percent in interest, high yield versions can offer up to 10 times higher rates, especially from online banks that have lower overhead costs.
These accounts are designed for easy access. You can move money in or out whenever you like. There's no fixed term, and while federal regulations used to limit certain withdrawals, those restrictions have largely relaxed.
Like most deposit accounts, high yield savings accounts at banks and credit unions are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA), typically up to $250,000 per account holder, ownership category, per FDIC-insured bank. That means your money is protected even if the bank fails—a level of safety you won't get from investments like stocks or mutual funds.
Best for: Savers who want easy access to their money while still earning a strong return.
What Are Certificates of Deposit (CDs)?
Think of a CD as a savings contract: You agree to leave your money on deposit for a set period—anywhere from a few months to several years—in exchange for a guaranteed interest rate. Because CDs tie up your funds, banks usually offer higher rates than they do for savings accounts. But there's a catch: If you withdraw funds before the CD's maturity date, you'll likely pay an early withdrawal penalty, which could eat into your earnings.
There are several types of CDs to choose from:
- Traditional CDs: Fixed rate, fixed term—simple and predictable.
- Jumbo CDs: Require large deposits (often $100,000 or more) but offer slightly higher rates.
- Bump-up CDs: Allow a one-time rate increase if your bank's CD rates rise during your term.
- No-penalty CDs: Let you withdraw early without a fee, often at the cost of a slightly lower rate.
CDs issued by FDIC-member banks or NCUA-insured credit unions are protected up to applicable limits, making them a relatively low-risk savings option.
Best for: Savers who don't need immediate access to their funds and want the security of a fixed rate.
Comparing CDs vs. High Yield Savings Accounts
Here's how CDs and high yield savings accounts stack up.
Interest rates
In general, CDs offer higher rates than high yield savings accounts. That's because you're promising to leave your money untouched. The bank can rely on your funds, so it rewards you for your loyalty.
However, CD rates vary by term length—the longer the commitment, the better the rate. Meanwhile, high yield savings accounts usually have variable rates, which means your rate can rise or fall as the market shifts. So while a CD locks in today's rate (good if rates fall), a high yield savings account gives you flexibility to benefit if rates climb.
Accessibility and liquidity
A high yield savings account offers easy access to your money whenever you need it. Whether you're transferring funds online, using your bank's app or making a quick withdrawal, liquidity is its superpower.
CDs, on the other hand, require more patience. To access your cash (and avoid an early withdrawal penalty), you usually have to wait until the maturity date at the end of the term.
Flexibility and terms
A high yield savings account is open-ended. With no term limits or expiration dates, you can let your deposits earn interest for as long (or as short) a time as you'd like. CDs, by contrast, have fixed terms, which limit your flexibility.
If you like the idea of CDs but still want some wiggle room, consider CD laddering. You divide your money across multiple CDs with staggered maturity dates—say, six months, one year, two years and so on. As each CD matures, you can cash out or reinvest, keeping your money both growing and periodically available. This approach smooths out interest-rate risk and helps maintain steady cash flow.
Risk and safety
The beauty of both CDs and high yield savings accounts is that they're about as safe as it gets. As long as your institution is FDIC- or NCUA-insured, your deposits (up to the insurance limit) are protected.
The main “risk" isn't losing money; it's losing purchasing power. If inflation rises faster than your interest rate, the real value of your savings can erode over time. CDs can help hedge against that with higher fixed rates, while a high yield savings account allows you to take advantage of rate increases as they happen.
Tax considerations
There's no major tax advantage to either option, since interest income from either CDs or high yield savings accounts is taxed as regular income in the year it's earned. If, however, you're saving for retirement, you can choose an IRA CD that provides either tax-deferred or tax-free growth.
Which Option Is Best for You?
Choosing between a high yield savings account and a CD comes down to your financial goals and time horizon.
- Consider a high yield savings account if you need flexibility and access—like for an emergency fund, a near-term purchase or any savings you might dip into.
- Consider a CD if you have a longer-term goal, like a dream vacation, and can commit to leaving your money untouched for the duration. The fixed rate can provide peace of mind, especially in a falling-rate environment.
Many savers mix and match by keeping emergency funds in a high yield savings account for instant access and using CDs for longer-term savings. That way, you get steady growth and reliable access without overcomplicating your finances.
Tips for Maximizing Your Savings
No matter which route you take, a few smart moves can help you make the most of your money:
- Shop around for rates. Digital-first banks often offer higher yields than traditional banks.
- Watch for fees. Avoid accounts with maintenance or withdrawal fees that could eat into your earnings.
- Review regularly. Market conditions change, and so can your bank's offers. Check every few months to ensure you're still getting a competitive return.
The Bottom Line
Both high yield savings accounts and CDs can help your money grow safely, steadily and without stress. The right choice depends on what you're saving for and when you'll need the funds.
If you value flexibility and immediate access, a high yield savings account can be your go-to. If you can lock your money away for a bit and want a guaranteed return, a CD could be your best bet. Either way, you'll be setting up your savings to earn more—and that's a decision that always pays off.
LEARN MORE: See today's rates for a Synchrony Bank High Yield Savings Account or CD.