What’s Smarter in Today’s On-Hold Rate Environment: High-Yield Savings or a CD?

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Pros and Cons of Savings Accounts and CDs 

The Federal Reserve has kept the federal funds rate unchanged so far in 2025. This benchmark rate affects savings account rates of many kinds. In this on-hold rate environment, is it better to open a high-yield savings account, or would a certificate of deposit (CD) be a smarter bet? As with many things in life, it depends.

Savings accounts offer one big benefit: flexibility. You can access your money at any time. Just be sure to note if there is a minimum balance required to earn the stated annual percentage yield (APY). Some banks may require a large balance, and “that may keep an investor from being able to access the absolute highest rate out there,” said Tom Graham, executive vice president at Janney Montgomery Scott, a wealth management firm.

But savings accounts have variable APYs, meaning your bank or credit union can change it at any time. CDs, meanwhile, offer a fixed rate for the duration of the CD term. That rate security is given in exchange for keeping your money in the account for a set period of time—and if you cash out early, you will generally pay a penalty. What you lose in flexibility and access, you gain in rate predictability and knowing how much you’ll earn from the CD.

Savings Accounts and CDs Are Appealing in Different Rate Environments 

So, how do you know which is right for you? One thing to consider is what current interest rates are and where they’re expected to go. When rates are historically high but expected to decline, a CD comes out ahead because your high rate is guaranteed even when future rates drop.

That’s the case right now, although current predictions show rates holding steady for some months before reductions later in the year. Interest rate traders at The CME Group predict rates will remain unchanged until September, which will see a drop of 0.25%. Another reduction of 0.25% is expected by the end of the year, for a total reduction of 0.50%.

When rates have the potential to rise, however, high-yield savings accounts may be a better option because they don’t lock you into a rate that might be worse than future rates. If you ever spot a savings account that pays more than your current account, you can always move to the better account. But given today’s rate expectations, a CD’s fixed APY will likely be more valuable than a variable APY as the end of the year approaches.

For Money You May Want to Withdraw, a Savings Account Is Best

The main advantage of a savings account is that you can access your money at any time. If this is important to you, start by comparing rates before choosing an account. The national average rate for a savings account is a low 0.42%–but it’s easy to find accounts with much higher yields. In fact, more than a dozen of the best high-yield savings accounts are offering 4.40% APY or better right now.

Even if it means opening an account at a new-to-you financial institution, it’s wise to shop around to get a top rate that will maximize your earnings.

For Money You Can Spare for a While, CDs Have an Edge

For savings you won’t need for some time, a CD is a safe, predictable option. In exchange for leaving your CD funds alone, the bank or credit union guarantees a rate for the full term—enabling you to know exactly what you’ll earn. Like savings accounts, it’s wise to shop around to compare rates and minimum balance requirements. Case in point: Among our daily list of the best 1-year CD rates are some that pay 4.50% APY, well above the national average rate of 1.75%.

Graham recommends CDs when you have a specific purchase or expense to save for. If you’ll be paying for an event in a year, for example, “buy a one-year CD and you remove … the risk,” he said. “If prices go up in one year, [you’ll have] the interest to cover that price increase.”

For Many Savers, the Best Strategy Is a Hybrid Approach

If you’re able to put savings in more than one place, that’s the best scenario. This allows you to take advantage of the best aspects of CDs and savings accounts.

Use the high-yield savings account to hold extra cash that you’d like easy access to. This is money that you’d use for an emergency expense. If you have additional money you don’t anticipate needing anytime soon, you can deposit that into a CD with a term that works for your budget and timeline.

This lets you utilize the flexibility of a savings account while capitalizing on the guaranteed rate of the CD. If you need some cash, you can withdraw from your savings account while leaving the CD untouched, reducing your chance of having to pay an early withdrawal penalty for the funds you need.

Ultimately, the best strategy is the one that helps you earn money and pay for expenses as needed. Rather than waiting for a specific rate or other event to occur, it’s best to put your money somewhere now, Graham said. If someone could earn 5.00% now but they’re waiting for that rate to hit 5.50%, let’s say, they’ve missed an opportunity. “Every day that they wait, they’re losing 5%,” he said. “There’s a real cost to waiting.”

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. It also cannot specify a maximum deposit amount that’s below $5,000.

Banks must be available in at least 40 states to qualify as nationally available. 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.