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4 times a CD is better than a savings account

High rates and fixed interest can help savers quickly grow their balances. Getty Images

Even if today's high interest rates may cost you in other parts of your financial life — from steep credit card rates to expensive auto and personal loans — one area where you can still benefit is your savings.

High-yield savings APYs now are above 4% APY and even close to 5%. But while high-yield savings accounts are a great place to look for these high rates (and offer a lot of flexibility when it comes to accessing your cash) certificates of deposit (CDs) may be even better for some savers.

CDs have a lot of advantages for savers looking to maximize interest earnings for as long as possible. Below, we've outlined four scenarios to help you decide when a CD could be the better savings option.

Learn more about how a CD can help you save more and compare today's top rates here.

4 times a CD is better than a savings account

Here are some times when you may want to choose a CD over a savings account:

When you want to score the highest rate available

Right now, short-term CDs offer some of the highest interest rates out there.

Some of the top CDs with shorter terms (around six months to one year) offer more than 5% APY, with some reaching as high as 5.20% APY and higher. Long-term CDs (those with terms from three years to five years or longer), on the other hand, typically earn around 4.20% to 4.30% APY. That's similar to high-yield savings accounts, which today earn between 4% and 4.50%, though some standout options can go as high as 4.85% APY.

Even outside of today's unique rate environment, CDs tend to offer higher APYs than savings accounts do. Because they require you to lock in your money for the full term length, you can typically score a slightly higher rate than on more accessible account types — including high-yield savings accounts.

Compare some top CD accounts here and lock in a high rate!

When rates could go down

CDs carry fixed interest rates, meaning the rate you lock in upon opening will not change through the entire CD term. That can be a big benefit if you believe interest rates could fall in the near future. 

"Even if an investor misses the peak, they are very happy to receive levels above 5% right now for select CDs," says Mike Biggica, CFP, founder of Pixel Financial Planning.

Despite ongoing speculation about the Fed's next moves, it's impossible to predict exactly when the Fed will lower rates, and when banks will respond with rate drops of their own. But we do know that interest rates can't remain this high forever. So if you think rates could fall sometime in the not-so-distant future, you could benefit from locking in a fixed CD rate today — instead of a variable savings account rate.

When you have a plan for CD laddering

CD laddering is a popular strategy in which you can split your savings balance between multiple CDs that mature at different times. Today, a CD ladder can help you take advantage of very high short-term CD rates while you also lock in solid rates for longer terms. Then, you may choose to keep rolling your money over into new CDs as they mature, as long as rates stay high.

You can't ladder savings account rates in the same way — high-yield savings accounts carry variable rates, so staggering when you open them doesn't have the same benefits as it does with CDs. 

"The CD protects against interest rate fluctuations, where the savings account does not," says Steve Schleupner, CFP, founder of You Tree financial planning. "I like the idea of blending the two in such a way that there is a short-term emergency fund in high-yield savings, backed by a CD ladder."

When you don't want to spend the money

One major downside of CDs, the early withdrawal penalty fees, could actually be a benefit for some savers. 

If you have a specific goal for the money you deposit in your CD — like a future down payment or to cover a child's college expenses — having the penalty in place may help you avoid spending the money on other, more impulsive things before your savings timeline is up.

While highly liquid high-yield savings accounts can be great for emergency funds that you may need to access on short notice, not being able to access the money you save in a CD could be key to helping you ultimately reach your savings goals.

Explore all the best CD options here now and start protecting your money.

The bottom line

In today's economic environment, there are plenty of reasons to consider saving with a CD. High-yield savings accounts are helpful for your emergency savings and other money you want to access quickly — but there are times when a CD could be better for your individual goals. Whether your aim is to maximize the best rates for as long as possible, start a CD laddering strategy or add an extra layer of protection between your money and your impulse to spend it, a CD could be a key tool in helping you save more today.

Get started by comparing the top CD rates available for you here.

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