High-yield savings vs. a CD: what actually changes?

Transcript

A high-yield savings account and a bank CD can both be safe places for cash when they are held at an FDIC insured bank. The big difference is flexibility. A savings account usually lets you move your money when you need it, but the bank can change the interest rate. A traditional fixed-rate CD asks you to leave the money there for a set term. In return, you generally know the rate for that period. Take the money out early, and you may owe an early-withdrawal penalty. So do not compare only the advertised APY. Check the CD term, the penalty, any minimum balance, what happens at maturity, and whether the CD automatically renews. Then ask yourself one practical question. Could you need this cash before the term ends? FDIC insurance generally covers up to two hundred fifty thousand dollars per depositor, per insured bank, for each ownership category. Savings gives you flexibility. A CD trades some of that flexibility for rate certainty. This was Money IN60seconds. One question. One minute. One useful answer.