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Why a high-yield savings account may be preferable to a CD in 2024

A high-yield savings account, with its high returns and ease of use, may be better than a CD for some savers this year. Getty Images

The start of a new year presents an opportunity to both reflect on the previous 12 months and plan for the upcoming calendar year. This can take many forms, not least of which is an appraisal of your personal financial situation. With interest rates still high but inflation cooling, you may find yourself looking for effective ways to both grow and protect your savings.

There are two primary ways to do so: a high-yield savings account or a certificate of deposit (CD) account. Regular savings accounts are generally suitable, but considering the returns are just 0.46% currently, they're generally not advisable in today's rate climate. 

But when stacked up against one another, should savers turn to high-yield savings or CD accounts this year? While both have their pros and cons, there's a compelling case to be made for using a high-yield savings account instead of a CD in 2024. Below, we'll break down why.

See how much more interest you could be earning with a high-yield savings account here now.

Why a high-yield savings account may be preferable to a CD in 2024

Here are three big reasons why a high-yield savings account may be better for your finances this year than a CD.

You'll maintain flexibility

CDs are a great way to boost your bottom line but they're not flexible. To earn the high APY many CDs come with currently, you'll need to commit to leaving your money in the account for the full CD term. If you attempt to take out some or all of it early you could get hit with a substantial early withdrawal penalty

High-yield savings accounts, on the other hand, come with rates that are nearly as high as CDs, but with the same ease of use you're already accustomed to with your regular savings account. So you'll essentially earn more interest but still be able to withdraw and add to your account as you see fit. 

And with the interest rate forecast unknown this early in the year, it may be better to keep your funds more flexible in case you need them.

Explore your high-yield savings account options online now.

You'll still earn a high rate

While interest rates on high-yield savings accounts aren't quite as high as what you can get with a CD, it's not difficult to find one with a rate of 4.5% or higher right now. And that rate will be variable, so if inflation doesn't come down further and the Federal Reserve enacts yet another rate hike, your money will grow alongside it. 

While that's not likely to happen soon, most don't expect rates on these accounts to drop dramatically either, making them a great way to earn many times more interest than you would have by keeping your money in a regular savings account this year. 

You won't pay any fees

CD early withdrawal penalties can be significant, resulting in the loss of some or even all of the interest you've earned on the account to that point. But high-yield savings accounts won't penalize you for withdrawing your money. And you may be able to find some accounts, particularly online, that won't mandate a minimum balance, either. Others won't come with maintenance fees. Just be sure to shop around and research all of your options to ideally find an account with the best rates and terms.

Get started here now.

The bottom line

Everyone's personal circumstances are different, particularly after the holidays and the start of a new year. With that said, there are some strong reasons savers should turn to high-yield savings accounts in 2024 instead of CDs. By doing so, they'll maintain the flexibility they already have with their regular savings accounts (a feature not available with most CDs), but they'll still earn a high interest rate at the same time. And, they won't have to worry about any early withdrawal fees — or maintenance or minimum balance ones, either (if they shop around and do their research). For these reasons, a high-yield savings account could be one of your better financial bets in 2024.

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