Savings Accounts vs. CDs: Where to Keep Your Money?

If you’re a savvy investor, you most certainly have a fair bit of cash tucked away for general spending and emergencies. The stock market is a long term investment and not for cash to you need to have around. So where do you put the money you don’t want in the stock market? There’s 3 main options to place your cash and get it FDIC insured for up to $250,000.

Photo by Alan Cleaver via Flickr

  1. You can put your money in a checking account where you have fast and easy access to funds.
  2. You can put your money in a savings account where you can take money out and put money in while still earning interest on your funds, or
  3. You can put your money in a certificate of deposit, which typically has higher yields than savings but your money is locked into the account for the agreed upon term.

So Where Should You Put Your Money?

Well all 3 of course.


For money that you plan on spending you should keep in a checking account. It’s the easiest account to get money into and out of so it makes sense to keep spending money in it. You shouldn’t keep more than you need to however because you don’t get a return on your investment in a checking account.

This is where savings accounts and certificates of deposit jump into the picture. Your strategy becomes more complicated now because of the fact that you must lock in a rate when opening a CD.

Savings versus CD

If you pay attention to CD rates you know that they’re at the lowest levels since the 80s right now. So it doesn’t make much sense to lock in to a long term CD right now because they’re bound to increase when the unemployment rate drops and the Fed decides to raise interest rates. So there’s 2 main strategies you should consider. The first is to convert any maturing CDs you have into savings accounts.

The yields on savings accounts are not that much lower than what banks are offering on CDs so there isn’t that much incentive to lock in your money. You could keep your extra cash in savings accounts which will leave you ready to jump on a CD when rates start climbing back up. Just make sure you stay under the $250,000 FDIC limit as a safety precaution against bank failure. The next option would be to invest in short term CDs.

Most people don’t expect interest rates to rise for at least 6 months if not longer, so another option would be to invest your money into 6 month CDs. The interest rates aren’t great but your money will be free to transfer out in 6 months and you can re-evalute what the economic climate in the US is going to be. There’s also little risk that rates will rise dramatically in that time, so you won’t miss out on a great rate. Nobody knows what’s going to happen for sure, but what we do know now is that deposit rates are low and you don’t need to be locked into long term CDs even if the rates being offered are a little higher than short term CDs and savings accounts.

About the Author

By , on Jan 6, 2013
Brandon Rowe is a deposit account expert and runs the Bromoney Online Banking blog. offers daily updates on the latest bank rates, bank bonuses, savings accounts, and CD rates.

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Leave Your Comment (5 Comments)

  1. Jenny says:

    Most of my liquid money is in my checking because, at the moment, it’s the difference between .02% and .2% APR.

    Sad, but true.

    I NEVER would have had so much money in checking even 8 years ago!

  2. Jessica Nunez says:

    great tips! I actually put half of my investment into a CD and half into two separate savings accounts. The reason I spread out my money is so that if there is an issue with one of my “no-risk” investments then at least I’ll have 2 more to count on. Also, if by some horrible occurrence I absolutely HAVE to close an account and use the cash, once again I’ll have 2 other that will still be gaining APY/interest.

  3. I totally agree with you. When my husband and I decided to live frugally and pay off our credit card debts and loans, we opened a separate checking account that will be used for our payments. After paying off two of our credit cards, we opened a CD. We started at 6-month term. Afterwards, we renewed it and increased the amount for a longer term. The interest rate is quite low but as they say, “A penny saved is a penny earned.”

  4. Emily says:

    I totally agree that it’s good to have money in all three places. Currently we have nothing in a CD, but that will probably change in the next few months. We have plenty in our checking account that we can move some of it over into a CD.

  5. Sarah Park says:

    These are absolutely wonderful tips to start the year. As a mom, I want to be wise enough on where to put my money because my kid’s future will also be at stake.

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