CDs vs savings accounts: Which is better for your savings goals?

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When it comes to saving money, there are many options available, but two of the most popular are certificates of deposit (CDs) and savings accounts. Both options offer a way to earn interest on your deposits, but they can differ in terms of your savings goals, access to funds, and interest rates.

In this post, we’ll define CDs and savings accounts, and discuss the considerations, advantages, and disadvantages that come with each. By the end, you’ll have a better idea of which is right for your individual financial situation and savings goals.

What is a certificate of deposit (CD)?

A certificate of deposit (CD) is a deposit account that usually offers a higher fixed interest rate than a traditional savings account. When you open a CD, the money you deposit must stay in the account for a set period of time (typically anywhere from six months to five years).

In exchange, the bank or credit union pays you a fixed rate of interest on your deposit. If you withdraw your money before the maturity date, you may be subject to an early withdrawal penalty, which is usually the equivalent of several months of interest.

What is a savings account?

A savings account is a deposit account that allows you to earn interest on your money. It offers easier access to your funds without penalty, but some platforms have a monthly limit on the number of transactions. This makes savings account much more liquid, while CD withdrawals incur a steep penalty. Savings account rates are also more variable than CD rates while your money is in the account. 

What to consider when deciding between CDs and savings accounts

When deciding between CDs and savings accounts, there are a few factors you should consider:

Your savings goals

If you have a short-term savings goal (like a vacation), a savings account may be a better option. If you have a longer-term goal (like a down payment on a house), if the CD has a higher rate of return, it may be a good trade-off when you don’t need the cash right away.


Savings accounts provide easier access to your money. CDs provide no access to your money in the duration of your CD without penalty.

Interest rates

CDs often offer higher rates than savings accounts and the rate is fixed for the term of the CD. Interest rates for savings accounts are typically lower than CD rates, but a high-yield savings account could come close and even exceed CD rates while still offering better liquidity.

Learn more about M1’s high-yield savings account, which offers 5.00% APY1 for M1 Plus members!



  • Sometimes higher interest rates than savings accounts
  • Fixed rate of return for the term of the CD
  • Can help you save for longer-term savings goals


  • Penalties for early withdrawal
  • Limited access to your money

Savings account


  • Easy access to funds
  • No penalties for early withdrawal (unless your bank enforces the six-transactions-per-month regulation)
  • Can help you save for both long-term and short-term savings goals


  • Sometimes lower interest rates than CDs
  • Rates can change over time

The M1 line

Saving is a crucial part of your overall financial plan. When deciding between CDs and savings accounts, it’s important to consider your savings goals, liquidity needs, and your rate of return preference. Savings accounts are ideal for both long-term and short-term savings goals and provide easy access to funds, while CDs are a better option for longer-term savings goals and may offer higher interest rates. Ultimately, it’s up to you to decide which account is better for your saving needs.


M1 is not a bank. M1 Spend is a wholly-owned operating subsidiary of M1 Holdings Inc. M1 High-Yield Savings Accounts are furnished by B2 Bank, NA, Member FDIC. 

1Obtaining stated APY (annual percentage yield) or opening a savings account does not require a minimum account balance. Stated APY is valid from date of account opening. Account fees may reduce earnings. Higher APY rate subject to paid M1 Plus subscription. Rates are subject to change. Stated APY for the M1 High-Yield Savings account is subject to change prior to product launch due to changing federal funds rate.