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Should you put extra cash into a CD or savings account?

For savers looking to earn a high interest rate on their extra cash, a CD may be worth it.

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With inflation still humming along in the background — and the higher interest rates meant to combat at a 22-year high — many consumers are taking a closer look at their personal finances.

With inflation eroding the purchasing power of the dollar, and uneven investment performance, it’s vital to make sure your personal savings are stored in the right place. And it’s becoming increasingly obvious that a regular savings account, with its minimal 0.43% interest rate, isn’t the best place for your money. In fact, if you’re keeping your money in a regular savings account in 2023, you’re likely losing money.

But with limited extra cash, where should you be putting your money? Is a CD the smart move now, or should you put your extra cash into a high-yield savings account instead?

Start by exploring CD and savings account interest rates here to see how much more you could be earning by opening one of these accounts.

Should you put extra cash in a CD or savings account?

Not sure if your extra money will be better served in a CD or savings account? Here’s what to know.

When you should put extra cash in a CD

You should strongly consider putting your extra cash in a CD if you’re looking to make the most interest possible. CDs come with slightly higher interest rates than high-yield savings accounts do, making them an easy way to earn more money without much effort on your behalf. 

To fully earn that interest, however, you’ll need to keep your money in the CD for the full agreed-upon term. If you withdraw it early, you could get penalized some (or all) of the interest earned to date. Because of this deterrent, CDs can also be smart for those who otherwise may subject their funds to a constant cycle of deposits and withdrawals. 

A CD is also good to hold your extra cash if you’re concerned about a potential interest rate drop in the future. CDs maintain their rate throughout the full term, regardless of what happens in the larger rate environment. So, if you open a 6-month CD today and rates drop during month three, you’ll still earn that higher rate.

Get started with a CD here now.

When you should put extra cash in a savings account

On the other hand, if you want to maintain some level of flexibility and access, you may be better served by depositing your extra cash into a high-yield savings account. High-yield savings accounts operate as regular savings accounts do, albeit with a higher interest rate. This will allow users to withdraw and add to their accounts as they see fit, making them a better option for those looking to turn their extra cash into emergency funds.

They’re also better positioned to earn additional interest. Since high-yield savings accounts come with variable interest rates, users will be able to earn an even higher interest rate in the future should the larger rate environment continue to head upward. And considering there are multiple high-yield savings accounts with an APY of 4.5% or more currently, this could add up to substantial savings over time. 

Learn more about your high-yield savings account options here now.

The bottom line

There is no right or wrong answer as to which savings vehicle is better for your extra cash. If truly in doubt, savers may want to consider splitting their funds between both account types to earn the benefits each is known for. However, by simply keeping your extra cash in a regular savings account, you’re losing money and not making the best of today’s elevated rate environment. So explore your CD and high-yield savings account options today and turn that extra cash into greater long-term savings

https://www.cbsnews.com/news/should-you-put-extra-cash-into-a-cd-or-savings-account/ Should you put extra cash into a CD or savings account?

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