High-Yield Savings Account and CD: What’s the Difference?

High-yield savings accounts have become a popular vehicle for depositing and growing savings because they allow account holders to earn substantial interest on their balances. But when it comes to hiding your cash, there is another option that some individuals may want to consider.

Certificate of deposit accounts (CD accounts) are similar to high-yield savings accounts in some ways, but the two have some very important differences.

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What is a high yield savings account and how does it work?

High-yield savings accounts allow you to earn a higher interest rate (compared to traditional savings accounts), which allows your money to grow even faster while it’s in your account. To put that in perspective, some high-yield savings accounts currently offer over 3% interest, while the national average APY on traditional savings accounts is just 0.17%.

The interest rate offered by these accounts is denoted as APY, which stands for annual interest income. The higher the APY on a particular savings account, the more interest you’ll earn and the faster your money will grow. You can also continue to make regular contributions to the account to grow your balance and the amount of interest you earn even faster.

However, it’s important to note that the APY offered by savings accounts can change at any time when you sign up. These rates rise or fall as the Federal Reserve changes its key interest rate. In other words, there will be times when you earn less money on your balance, but also times when you earn more money on your balance. Even so, you’ll earn more than if you kept your money in a traditional savings account. And you still have access to your cash when you need it, just like with a regular savings account.

What is a CD and how does it work?

CDs are another type of account that organizations offer. Similar to a high-yield savings account, CDs allow you to deposit money into your balance to earn interest. Sometimes the interest you earn on a CD can even be higher than what you earn on a high-yield savings account.

However, the difference is that you have to keep your money locked in your account for a certain period of time. This is known as the length term. The length of the term varies from three months to five years, and usually the longer the term, the more interest you will earn. Typically, you should avoid trying to access your money before the expiration date or you will face early withdrawal penalties.

Penalty fees may vary depending on your bank or credit union. However, usually the penalty is equal to the interest you earned or the interest you would have earned over a certain number of days or months.

Also, the interest rate offered by high-yield savings accounts can change while your money is in the account, but when you save with CDs, the rate you lock in stays the same throughout. This can be a good thing if you open an account before the rate drops. You also cannot make additional contributions to a CD after you open the account and make the down payment.

How to choose between a high-yield savings account and a CD?

If you’re saving for a big purchase (like a house or car) that you hope to make in the next six months to two years, and you want your money to grow faster, opening a CD might be a good idea. worried about stock market volatility. However, you should still make sure you deposit money that you won’t necessarily need during that period, as you may be penalized for withdrawing before your term is up.

This is why CD accounts are not the best accounts for building an emergency fund. Emergencies can arise when you least expect it. Because of this unpredictability, you never know when you will need to withdraw from your account. In this case, a high-yield savings account would be more appropriate to increase your emergency fund.

The best high yield savings accounts

Choose Marcus as the best high-yield savings account with no fees by Goldman Sachs High-Yield Online Savings. And if you want an even bigger opportunity to earn extra cash, the SoFi Checking and Savings account offers a welcome bonus of up to $300, depending on how much you deposit when you open the account. For more information, see our full list of the best high-yield savings accounts.

Marcus, High Yield Online Savings by Goldman Sachs

Goldman Sachs Bank USA is member FDIC.

  • Annual Percentage Yield (APY)

  • Minimum balance

    None to open; $1 to earn interest

  • Monthly payment

  • Maximum transactions

    Up to 6 free withdrawals or transfers per reporting period * 6 / the statement period withdrawal limit is canceled during the outbreak of the coronavirus in accordance with Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a checking account?

  • Do you offer an ATM card?


  • No minimum balance (just $1 to earn interest)
  • No monthly fees
  • Up to 6 free withdrawals or transfers per reporting period*
  • Easy to use mobile banking app
  • Offers commission-free personal loans


  • There is no option to add a checking account
  • No ATM access
  • You cannot deposit a check through the mobile app

SoFi Checking and Savings

Information about Sophie Checking and Savings has been independently collected by Select and has not been reviewed or provided by the issuer prior to publication.

  • Monthly maintenance fee

  • Minimum deposit to open

  • Minimum balance

  • Annual Percentage Yield (APY)

    Direct deposit members earn 2.50% APY. Members without direct deposit will earn 1.20% APY.

  • Free ATM network

    55,000+ fee-free ATMs within the Allpoint® Network

  • Payment of ATM fee

  • Overdraft fee

    No-Fee Overdraft Coverage Available; however, SoFi requires a monthly direct deposit flow of $1,000 to unlock

  • Mobile check deposit


  • There is no minimum deposit to open an account
  • 1.80% APY on direct deposit
  • Automatic 2-day early payment when you set up direct deposit
  • Automatically save change with Roundups and set savings goals with Vaults
  • Get up to 15% cash back at local businesses
  • No foreign transaction fees


  • No reimbursement for out-of-network ATM fees
  • Not a separate checking or savings account

The best CD accounts

When it comes to CD accounts, Select Synchrony Bank ranked the CD as the best option for locking up your money for three to six months. If you’re comfortable locking up your money for a longer period of time, the Ally Bank High Yield CD allows you to do so for up to five years. For more information, see our full list of the best CD accounts.

As you can see, their APYs are currently slightly lower than high-yield savings accounts, but on the upside, you’ll lock in the rate for a longer period of time.

Synchrony Bank CD

Synchrony Bank CD information has been independently collected by Select and has not been reviewed or provided by the card issuer prior to publication.

  • Annual Percentage Yield (APY)

  • Minimum balance

  • Monthly payment

  • Early withdrawal penalty

    For 3-month CDs: 90 days of interest earned or unearned


  • Above average APY
  • Compounds interest daily
  • No minimum balance
  • No monthly fees
  • The website is easy to navigate


  • You cannot access your money until the CD expires
  • Early withdrawal penalty

*Annual Percentage Yield (APY) effective as of 10/3/2022. A penalty may apply for early withdrawal. Fees can reduce earnings. After maturity, if you choose to roll over your CD, you will earn the then-current prime rate. Offer applies to personal accounts only. Individual Retirement Accounts (IRAs) are not eligible for this offer.

Ally Bank High Yield CD

Ally Bank High Yield CD information has been independently collected by Select and has not been reviewed or provided by the bank prior to publication. Ally Bank is member FDIC.

  • Annual Percentage Yield (APY)

    APY varies depending on tenure. Click on “More information” for more information.

  • Minimum balance

  • Monthly payment

  • Early withdrawal penalty

    For a 5-year CD (or any CD with a term of 49 months or longer): 150 days equals interest


  • Above average APY
  • Interest is increased daily
  • Not all CDs have a minimum balance
  • No monthly fees
  • Offers a variety of CD options to increase your APY or withdraw without penalty
  • 0.05% Loyalty Reward automatically added to CD account renewal
  • It has an easy-to-use website, mobile app and top-rated customer service


  • You cannot access your money until the CD expires
  • Early withdrawal penalty (unless you open Ally’s No Penalty CD)

Editorial note: The opinions, analyses, opinions or recommendations expressed in this article are solely those of the Select editorial staff and have not been reviewed, endorsed or otherwise endorsed by any third party.

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