Comparing Today's Savings Account vs. CD Rates

When deciding where to put your cash savings, the interest rate you can earn with different options is an obvious consideration. Shopping around is always a smart move, as different institutions can pay wildly varying rates on similar products. But beyond that, you also have a choice of whether you want to earn as much as you can now, or if instead you want to balance what you'll earn today with an eye on what you'll earn in the future.

This is one of the primary differences between a high-yield savings account and a certificate of deposit (CD). With a savings account, you'll earn whatever the bank or credit union's current rate is. And right now, the best high-yield savings accounts are paying historically high rates, with the leading offer paying a stellar 5.50% APY.

But banks and credit unions can change their savings account rate any time they want, and they don't have to provide any advance warning. This is where CDs have an advantage for those who plan to keep their funds in the bank for a little while down the road.

While CD rates are also paying very high rates right now—including national leaders offering 5.75%—most of today's CDs are paying less than the best savings account rate. That's because CDs offer you not just a rate, but a rate and a promise: For the full number of months or years in the term you choose, the CD's rate will be locked and guaranteed.

That means a CD may pay a little less right now than a leading savings account. But if interest rates decline while you still hold the CD, you'll likely win later, when savings account rates have dropped but your fixed CD rate keeps delivering its original rate.

Where Are Interest Rates Headed in 2024?

It's been a lucrative year to have surplus cash in the bank, thanks to the Federal Reserve's aggressive fight against inflation. By raising the federal funds rate a cumulative 5.25% since March 2022—to the highest level in 22 years—the central bank also pushed up the returns you can earn on bank deposits.

But the savings and CD rate party is showing signs of winding down, with the Fed signaling in mid-December that its rate-hike campaign is now most likely finished. Though the Fed committee has so far opted to maintain the fed funds rate at its historic high—and has stated that an additional rate hike is still within the realm of possibility—odds look a bit stronger that the Fed will begin cutting its benchmark rate in 2024.

Indeed, the median projection by Fed committee members in December was that they would reduce the fed funds rate three times, for a total of 0.75%. Given that forecast, rates on CDs have already begun to soften, since they are paying a rate that's guaranteed into the future. In contrast, savings rates—which a bank can lower instantaneously—have so far held onto their historically elevated level.

Whether the Fed actually implements one or more rate cuts in 2024 remains to be seen. As we always caution, the economic landscape can change quickly, which in turn can cause the Fed to change course from previous projections. It's also worth noting that Fed members' predictions on rate cuts are for 2024 as a whole, with no signals on when this year they expect the first cut to take place.

How to Choose Between a Savings Account and a CD

The most important factor in deciding whether to put money into a savings account or a CD is when you will need the funds. If you expect to need them in the short term—or just need the keep the flexibility to withdraw them should a need arise—then a savings account is a safer bet, allowing you to access your cash whenever you want it.

Just be prepared that savings account rates are likely to fall in the coming year or two. And while the trend will be widespread, you may still be able to find a better return than your current rate by shopping our daily ranking of the best high-yield savings accounts.

If you're lucky enough to have more funds in savings than you need to keep accessible, however, you could siphon off a portion of your cash to a CD. That way at least some of your savings will continue to earn a higher rate if savings rates come down in the future.

This hybrid approach is smart for almost anyone considering a CD. It would be unwise to shuttle all of your cash reserves to a CD that will impose an early withdrawal penalty if you cash out before maturity. Instead, it's a smart move to keep a cushion of funds in a savings or money market account—so you have easy access should you need it—but decide what portion you can live without for some number of months or years, and deposit that amount into a CD.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.