May 15, 2025

Savings Accounts vs. Certificates Of Deposit (CDs)

 

Saving money is an essential part of a healthy financial journey. It builds financial security, prepares you for unexpected expenses, and supports long-term goals like buying a home, starting a business, or retiring comfortably. 

 

Saving creates a strong safety net by reducing reliance on debt and offering greater decision-making flexibility — especially when income is uncertain or costs rise unexpectedly.

 

There’s an endless list of reasons why saving money is important. So, what’s the best way to do it? Let’s look at two popular methods: savings accounts and certificates of deposit (CDs).

 

What Is A Savings Account?
A savings account allows you to store away funds that aren’t used for everyday purposes, such as for a rainy-day fund or specific, short-term goals. You can earn interest (usually a small percentage) on your balance.

 

What Is A Certificate Of Deposit (CD)?
A certificate of deposit is a type of savings account that secures your money for a specific period of time (3 months, 18 months, etc.) in exchange for a higher, guaranteed interest rate. These rates are fixed and are typically better than those of a regular savings account.

 

When that duration has finished (also known as the CD’s 'maturity'), you can reclaim your deposit and the interest it earned, or roll it over to a new CD to keep the earnings going. If you remove your money from the CD before it has matured, you can be penalized with an early withdrawal fee.

 

Key Differences Between CDs & Savings Accounts

Feature	Saving Accounts	Certificate Of Deposit (CD)
Liquidity	High liquidity, can withdraw anytime (some limits may apply)	Low liquidity, funds are locked for a set term
Interest Rates	Lower, variable rates for a variable return	Higher, fixed rates for a guaranteed return
Access To Funds	Easy access via ATM, online banking, or at a branch	Penalty for early withdrawal before maturity
Flexibility	High, can add or withdraw funds at any time	Low, has a fixed term and deposit amount
Minimum Balance	Often low or none	Usually requires a higher minimum deposit
Typical Term	Ongoing	Variable, can range from 3 months to 5 years or more
Best For	Emergency funds and short-term savings	Long-term savings you won’t need access to immediately
Risk	Interest rate may not keep up with inflation, your money could lose purchasing power over time	Unaffected by market volatility, making them appealing for conservative investors
Taxable	Interest is taxable as income	Interest is taxable as income, even if you don’t withdraw until maturity
Ease Of Use	Most can be opened and managed online	Most can be opened and managed online, but some may require a phone call or branch visit to open
Fees	Typically, low/no maintenance fees	Low/no maintenance fees, but early withdrawal fees may apply

 

When Should You Choose A Savings Account?
Choose a savings account if you need flexible access to your money and plan to make frequent deposits or withdrawals. They’re great for short-term savings goals, such as:

• Emergency funds
  
• Vacation or travel savings
  
• A down payment on a car
  
• Home repairs
  
• Vet bills

When Should You Choose A CD?
Choose a CD if you want a guaranteed return and can leave your money untouched for a specific period to earn higher interest. They’re great for long-term savings goals, such as:

• A down payment on a house
  
• Supplemental retirement savings
  
• College funds
  
• Savings for a big purchase
  
• Starting a business

At BCU, we understand how essential saving money is on the path to financial freedom. That’s why we offer a variety of accounts designed to help you maximize your money potential, without hidden costs or unnecessary fees. 

 

When you become a member of the Credit Union, we make the $1 deposit in the regular savings account required to open a membership for you. We also offer a higher-yield Rainy Day Savings™ account to jumpstart your short-term savings. 

 

Looking for a CD? It only takes $500 to open, no matter the term length or interest rate. Our diverse CD terms allow you to align your investment with your timeline, whether it's a short-term boost or long-term growth. 

 

Learn more about the savings and CD accounts we offer and start your financial freedom journey today.

 

Ready to experience the credit union difference? Become a member of BCU!