CDs vs high yield savings - which is better right now?

Personal Finance

I have about ,000 sitting in savings that I dont need to touch for at least a year (emergency fund is separate). Everyone keeps talking about high yield savings accounts but my credit union is offering 5.25% CDs. The HYSA rates seem similar. Whats the actual difference and which should I go with? Does it even matter that much?

Andrew Jackson

3 Answers

Best -->

For money you wont touch for a year, CDs at 5.25% are slightly better than most HYSA rates right now. But theres some nuance:

CDs:

Rate is locked in (good if rates drop, bad if they rise)

Early withdrawal penalty if you need the money (usually 3-6 months interest)

Set it and forget it

HYSA:

Rate can change monthly

Complete flexibility to withdraw anytime

Current rates around 4.5-5%

My suggestion: CD ladder. Split your k into:

k in 3-month CD

k in 6-month CD

k in 9-month CD

k in 12-month CD

k in HYSA for flexibility

This way you get good rates but have some money freeing up regularly if you need it. When each CD matures, roll it into a new 12-month if you dont need it.

But honestly the difference between 5.25% and 4.75% on k is only like /year so dont overthink it too much.

Sarah Taylor

For money you might need in the next year, HYSA wins for flexibility. CDs only make sense if youre absolutely sure you wont need it AND the rate is significantly better. Right now rates are similar so why lock it up?

Jessica Brown

I do a CD ladder - split the money across 3, 6, 9, 12 month CDs. Something is always maturing if I need it, but Im getting better rates than HYSA on most of it.