Saving money is an important factor in reaching your financial goals. But what’s better—saving your money in a savings account or a certificate of deposit (CD)? While both have benefits, it usually comes down to how long you’re able to leave money in your account. Learn more about the differences between a savings account and a CD to find out what’s best for you.
What is a savings account?
A savings account is a deposit account where you can earn interest on the money in the account. Over time the interest will compound monthly helping your savings to grow at a steady pace.
Best Used for: If you need easy access to your money, a savings account works great. It’s a smart place to start an emergency fund where you can access your money fast if the unexpected happens.
Withdrawal limits: Most financial institutions let you make six withdrawals from a savings account each month. A majority of institutions will not let you withdrawal after this, or if you do, they’ll charge you a fee for the withdrawal.
Opening balance: The minimum balance to open a savings account is usually low. It only takes $5 to open a Partner Colorado Savings Account.
Interest Earned: Savings accounts typically offer a lower interest rate when compared to other types of deposit accounts. The interest rates for a savings account can fluctuate.
What is a CD?
A CD is a deposit account that lets you earn a fixed amount of interest as long as you leave your deposit in the account for a set period of time.
Best Used for: If you can live without the cash you put in a CD for the entire term, a CD can give you more earning potential than a savings account. It’s a smart place to put extra cash you know you won’t need to spend or it can help you save for a planned expense for a specific time in the future. For example, if you know you’ll be taking a big vacation in 14 months, a 12-month CD could help you earn additional money before you go.
There are different types of CDs to help you save for certain things. For example, you can also open an Individual Retirement Account (IRA) CD which allows you to put money away for retirement. Check out the bonus rates on our IRA CDs—only available for a limited time.
Withdrawal limits: Typically, if you withdrawal money from a CD before the term is up, you are required to pay an early withdrawal penalty. This can take away from any interest you earned and possibly from the original deposit you made.
Opening Balance: The minimum balance to open a CD is usually more than what it would take to open a savings account. For example, the minimum amount to open a CD could range from $500 to $1,000 or more, depending on the financial institution and the type of CD.
Interest Earned: Interest rates for CDs are usually higher than what you can find for a savings account. Normally, the longer the CD term—the higher your interest rate will be. Also, with a CD, your interest rate is fixed for the duration of the term. This allows you to be able to predict exactly how much you’ll earn.
Check out our new CD rates—good through April 15, 2020 and open your own CD today!
Whether you save your money in a savings account or a CD, the important thing is you’re saving money. It’s a good financial habit that will set you up for success.