CD vs. HYSA: What's the Better Place for Your Savings Right Now?

If you're anything like me, you've probably come across an endless supply of financial hacks and tips to maximize your money. And some of it is worth considering. But it can be tricky to know the right move as the economy continues to shift.

After all, a high-interest-rate environment cuts both ways, giving you the opportunity to earn more for putting money into interest-bearing accounts while also hiking up the cost of high-interest debt, like that held on credit cards.

Certificates of deposit (CDs) and high-yield savings accounts (HYSAs) can be appealing if you have extra cash to put away.

Here's what you need to know about them, and which one is a better option right now.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings Member FDIC.	APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
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The basics of CDs and HYSAs

Both CDs and HYSAs let you earn interest, but they work quite differently:

Why HYSAs are the better option right now

It would be easy to say that a CD is better than a high-yield savings account because it guarantees a certain amount of interest for a specific amount of time, while rates on HYSAs can change at any time.

For example, imagine you have $5,000 to put in either a 3-month CD or a HYSA. If the CD has a 5.25% APY, you'd earn $65.63 over three months. A HYSA that has a 5.36% APY would earn $67 over the same time period -- unless rates were to fall during that time, which could drop the earnings below that of the CD.

But here's the thing: While CDs offer stable APYs, the highest rates aren't usually associated with the longest terms right now. Instead, they tend to fall in the shorter terms -- meaning you'd actually be selling yourself short by going for a longer term, which is a big draw for these products. And if rates drop in a few months, you'd still probably not get much of an advantage by locking away those funds in a CD, depending on the remaining term and how much rates change.

Meanwhile, HYSAs preserve the ability to tap into your cash when you need it, which can be essential if something unexpected (and expensive) comes up. And you can keep adding to the balance, maximizing your potential earnings over time.

Just be sure that you can meet the requirements for earning the highest HYSA rates and avoid fees. That may mean maintaining a specific balance in that account or limiting withdrawals each month. Assuming you can do that, the risk of losing out on the gains offered by a CD are outweighed by the higher rates and accessibility offered by HYSAs.

In a time when inflation and the ever-increasing cost of living are making it that much harder to get by, it's vital to make sure you can access your money when you need it. That way, you'll be ready for whatever comes your way, and you'll be able to simultaneously capitalize on the high-rate environment.