With CDs, you deposit a specific amount of money for a fixed period of time — months or years — at a guaranteed rate of interest.
While you can't prematurely withdraw those funds without paying a penalty, the trade-off is that CDs tend to offer higher interest rates than most savings accounts.
That's much higher than the average annual percentage yield you'll find for traditional savings accounts, which was 0.57% as of Jan. 16, 2024, per Bankrate.
While high-yield savings might offer APRs more comparable to CDs, you can often find CDs with slightly higher rates.
Some CDs also offer higher yields than one-year Treasury bonds, which are comparably safe investments.
Persons:
Gen Zers, Jay Zigmont
Organizations:
Federal Reserve, Federal Deposit Insurance Corporation, Childfree