When deciding between a regular savings account and a standard CD, or certificate of deposit, there are some major things to keep in mind. If you want higher rates, then certificates of deposit are the way to go. If you want access to your money more frequently, then a savings account is the best route for you.
If you prefer to withdraw funds without any penalty, but still want above average rates, then a no-penalty CD is the way to go. They offer a fixed rate, unlike standard CDs, and give you the option to make one free withdrawal. Continue reading to learn the benefits about each type of account.
The Basics
A no-penalty CD is still a CD but one of its major upsides is that it comes with fixed rate and term length. This means you are guaranteed that rate for the duration of the certificate’s term length. A big difference between this type of CD and a traditional one is that you can withdraw the cash once without losing any money.
A standard CD locks the money that you initially deposit into the account for a specified term in exchange for a fixed rate that is normally much higher than a savings account. If you were to withdraw money from this type of CD, you will be charged a penalty fee for withdrawing money earlier than the term length.
A savings account earns interest and lets you add and withdraw money over a period of time. However, you must keep in mind that there are limits to how frequent you withdraw money. Also, savings rates are not fixed and can change at any time.
When To Choose a No Penalty CD
If you want a fixed rate. Like other CDs, a no-penalty CD will have fixed rates that can benefit you if banks were to change their annual percentage yields (APYs) on savings accounts.
If you want more options over a standard CD. No-penalty CDs allow you to withdraw all of your money at any time during the term length. The catch is, once you do take all of your money out, the account closes. You must also take all of it out at once.
 With the CIT Bank No-Penalty 11-Month CD: • Earn 4.90% APY on your funds with just a $1,000 minimum deposit. • The perfect balance between a great fixed rate and flexible money access. • Access funds, if needed. No penalty. • No opening or maintenance fees • Shorter 11-month timeframe and a great APY • If you need your funds prior to the maturity date, you can withdraw your money — including any interest earned — beginning seven days after the funds have been received. No penalty. No problem. It's the security of a CD with the flexibility to access your funds early if you need them. |
When To Choose a Savings Account
You plan on building your savings up slowly. An important part in saving, is adding money to an account over time. This is what a savings account is built for. You don’t have this option if you choose to go for a CD.
You want the flexibility to make withdrawals. You don’t need to plan when you’ll need money in the future since savings accounts let you withdraw up to six times per month.
Compare Savings Accounts
 Open a Discover Online Savings Account for all these features: • Earn $200/$150 Bonus with promo code HMB223 by 06/15/2023 • Earn high interest rate of 3.90% APY • No minimum opening deposit, no minimum balance requirement, and now no fees • Interest on Discover Online Savings Accounts is compounded daily and credited monthly • Manage your account online or with the Discover mobile app • FDIC insurance up to $250,000 • See advertiser website for full details To get your $150 or $200 Bonus: What to do: Apply for your first Discover Online Savings Account, online, in the Discover App or by phone. Enter Offer Code HMB223 when applying. Deposit into your account a total of at least $15,000 to earn a $150 Bonus or deposit a total of at least $25,000 to earn a $200 Bonus. Deposit must be posted to account within 30 days of account open date. Maximum bonus eligibility is $200. What to know: Offer not valid for existing or prior Discover savings customers or existing or prior customers with savings accounts that are co-branded, or affinity accounts provided by Discover. Eligibility is based on primary account owner. Account must be open when bonus is credited. Bonus will be credited to the account within 60 days of the account qualifying for the bonus. Bonus is interest and subject to reporting on Form 1099-INT. Offer ends 6/15/2023, 11:59 PM ET. Offer may be modified or withdrawn without notice. |
With the CIT Bank Savings Builders account: • Earn a top tier, competitive APY on your money—one of the top savings rates in the nation. Earn up to 1.00% APY on your funds - grow your savings faster. • Build a habit of savings. Pay yourself first. Start with $100 per month and build your habit of savings-—all while getting a top rate. • FDIC Insured |
 With the American Express® High Yield Savings Account: • Earn 3.90% APY as of 5/16/23 on your deposits. Your High Yield Savings account earns interest daily and is posted to your account monthly. • Links easily with your current bank accounts. No need to switch banks. • FDIC Insured. Your account is insured to at least $250,000 per depositor. • 24/7 Account Access |
 • Earn up to 0.61% APY with interest compounded daily and no monthly fees with the Axos Bank High Yield Savings account • No minimum balance requirements • Free ATM card upon request • $250 minimum opening deposit • Free Incoming Wires |
Bottom Line
Choosing the right financial product for you doesn’t have to be hard. Especially if you consider the things we have listed above.
A no-penalty CD is a great choice if you want higher rates but think you’ll need the money soon. If you’re not worried about needing a certain amount of money immediately, then go for a traditional CD.
Other than that, saving money gradually means you should go for a savings account because it will allow you to do just that. For more posts like this, check out our list of bank guides!
Know if any banks that let you buy/fund a CD with credit card?