What are the differences between a savings account and a CD?

What are the differences between a savings account and a CD?

A savings account offers liquidity and easy access to funds, while a CD (certificate of deposit) typically has a fixed term and higher interest rates.

Which one is better for saving money?

It depends on your goals. If you need quick access to your money, a savings account is better. For higher interest and no immediate need for funds, a CD is ideal.

What are the interest rates like for each?

Savings account rates are usually lower, around 0.01% to 0.5%, while CDs can offer rates from 0.5% to 2% or more, depending on the term.

Are there any penalties for withdrawing from a CD?

Yes, withdrawing from a CD before its maturity date usually incurs a penalty, which can reduce your interest earnings.

Can I open both a savings account and a CD?

Absolutely! Many people use both to balance liquidity and earn higher interest on longer-term savings.