3 Reasons to Choose a CD over a Savings Account

If you’re like most Americans these days, then you’re probably a bit wary when it comes to making any moves with your money, and particularly your savings. But in these troubled economic times, being totally shutdown to certain financial options can often only serve to further hinder your future finances.

When it comes to savings in particular, by doing just a bit of research about the various options out there, you can easily grow your savings without taking huge, unnecessary risks. Here we look at three of the reasons to consider switching your savings over to a certificate of deposit, or CD, from an existing personal savings account:

– Interest Rates: The difference between the average APY rates for certificates of deposit and personal savings accounts is substantially large. While the latter usually hovers somewhere in the .70 to .80 percent range for better personal savings accounts, the same quality CD rates are between 1.00 and 1.15 APY, and occasionally even higher depending on the institution offering the CD. With discrepancies this large, it’s a wonder that you’re not already invested in a CD over a personal savings account. But still, there are further benefits to consider as well.

– Options: Depending on your goals and current financial position, there are multiple time-frame options one can choose from for various CDs. They can range from anywhere between 3 months to multiple years, at varying and generally increasing APYs as the term lengths increase. Some institutions like Discover Bank even offer APYs up to 1.75% with longer CD terms in place that may be good considerations for those able to withhold from accessing their savings over longer periods of time.

That means that if whether you think you’ll need access to your savings in the near future, or have the means to go longer without access, you can choose an appropriate option and still gain more interest than if you were to leave your savings in a personal savings account. Comparing rates and term lengths of a number of different financial institutions is a good way to find the absolute best option for your needs, and increase your savings growth as much as possible.

– Security Against Unnecessary Spending: While some may look at the most recent point as a disadvantage in that you usually are unable to or urged not to touch your savings until the maturity date of the terms set forth, it can actually be a great measure against unnecessary spending of your preciously saved funds. It follows the old adage of, “out of sight, out of mind.”

By investing your money in a CD you are not only ensuring yourself a greater return, you’re also ensuring that you don’t have even less than you started with by waiting until the CD matures over the course of the term you select. In essence, it’s a big win-win.

If making your money work for you, and generating as much growth with that hard earned cash is a priority of yours, as it is for most Americans, then looking into CD options is one great way of going about meeting that priority head-on. As someone who’s seen real life growth from various CD options, I strongly recommend you take the time to do some research and find a suitable CD for your financial priorities.

One thought on “3 Reasons to Choose a CD over a Savings Account

  1. Jagger

    Not very enlightening. The author had to dig deep for this one. Only two of the reasons are applicable and as beneficial as portrayed. One must assume if you have created additional savings and need to consider a different savings vehicle your spending behavior is already a deterrent to “security of unnecessary spending”
    If you take 25k and throw it in a 5yr CD @ 1.1% (best rate on a google search) you’ll only get about $330 bucks more than 5 years interest a high yield savings like ally, ing, or amex which is offering an average of .82.
    What about the option of keeping it in savings until rates improve? If rates go up even slightly for high yield savings in the next few years, returns will be greater than any cd someone would lock themselves into today. And if rates don’t go up, there are bigger things to worry about because Obama and his friends are going to tax the hell out of everyone.

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