So you’re looking to stash some money away for a rainy day…or maybe a sunny vacation stay. But you’re not sure which is a better choice – a savings account or a certificate of deposit (CD).
Obviously both are designed with savings in mind. And both will earn you interest. But there are some significant differences to consider.
A savings account is an interest-bearing deposit account that you can set up at a bank or another financial institution. Depending on the institution, you may be limited on the number of withdrawals you can make from the account each month. Plus, fees may be charged if you don’t maintain a certain average monthly balance in the account.
A savings account usually can be opened with an initial deposit of just a few dollars. Subsequent deposits can be made for any amount and at any time.
A certificate of deposit is a product that’s set up for a specific amount of time, such as one year, two years, or five years. It’s available through banks, credit unions, and thrift institutions. A minimum deposit is required no matter what time frame is chosen. At Bank5 Connect, the minimum is $500.
CDs are similar to savings accounts in that they are virtually risk free. For banks, CDs are insured by the Federal Deposit Insurance Corporation (FDIC). For credit unions, insurance is provided by the National Credit Union Administration (NCUA).
All Bank5 Connect CDs have FDIC insurance for up to $250,000, plus CDs are insured for over $250,000 by the Depositors Insurance Fund (DIF).
What makes CDs different from savings accounts is that they usually have a fixed interest rate and a specific, fixed term. The latter is intended to have the customer hold onto the CD until it reaches its maturity, at which time the money invested can be withdrawn, along with accrued interest.
CDs are known for offering a competitive interest rate compared to savings accounts. And, unlike savings accounts, a typical CD is established with a lump sum deposit.
Usually, a customer will receive a higher interest rate if they have a larger principal to invest and they choose a longer term for the CD. However, penalties are typically assessed for early withdrawals.
Bank5 Connect CDs have terms of 6, 12, 18, 24, and 36 months, and there are no monthly maintenance fees.
Looking to learn more about our savings products? CD information is available at http://www.bank5connect.com/home/cds
Savings account options, including current rates, are available at http://www.bank5connect.com/home/high-interest-savings