Choosing whether to save money using a savings account or a certificate of deposit may seem like a simple decision. But it’s a bit more involved than flipping a coin to decide which way to go.
Before making your selection, it helps to know what each product has to offer. So let’s take a closer look at both.
A certificate of deposit, or CD, is a savings product that is 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 lump sum deposit, such as $500, is usually required no matter what time frame is chosen.
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).
At BankFive, all CDs are insured for up to $250,000 by the FDIC. In addition, all BankFive CDs are insured for over $250,000 by the Depositors Insurance Fund (DIF).
What makes CDs different from savings accounts is that they are locked in to a specific, fixed term and, usually, a fixed interest rate. The intent is to have the customer hold onto the CD until it reaches its maturity, at which time the money invested can be withdrawn, along with accrued interest. Oftentimes, customers will roll over a matured CD into a new CD to continue building interest on their funds.
Among the benefits of CDs are that they typically offer a competitive interest rate, and there’s no need to regularly set money aside, since one lump sum deposit is made at the time the CD is opened. 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.
BankFive offers a variety of CD lengths – 6 months, 1 year, 18 months, 2 years, 3 years, and 5 years. A minimum of only $500 is needed to open a BankFive CD, and there are no monthly maintenance fees.
Our 2-year investment CD is a convenient way to put aside money without making a special trip to the bank. Deposits as little as $10 can be electronically transferred from a BankFive checking account on a weekly, bi-weekly, or monthly basis. What’s more, additional deposits of as little as $10 can be made at any time over the two-year period.
On the flip side of the coin, a savings account is an interest-bearing deposit account held at a bank or another financial institution. Distinguishing characteristics may also include:
Unlike CDs, a savings account typically can be opened with a deposit of just a few dollars. Subsequent deposits can be made into the account at any time and for any amount. This flexibility comes with a trade-off, however, since interest rates are usually lower than what CDs have to offer.
You can learn more about BankFive's CDs at our Certificates of Deposits page.
And more information about our savings account options, including current rates, is available at our Savings Accounts page.
Before making your selection, it helps to know what each product has to offer. So let’s take a closer look at both.
A certificate of deposit, or CD, is a savings product that is 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 lump sum deposit, such as $500, is usually required no matter what time frame is chosen.
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).
At BankFive, all CDs are insured for up to $250,000 by the FDIC. In addition, all BankFive CDs are insured for over $250,000 by the Depositors Insurance Fund (DIF).
What makes CDs different from savings accounts is that they are locked in to a specific, fixed term and, usually, a fixed interest rate. The intent is 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. Oftentimes, customers will roll over a matured CD into a new CD to continue building interest on their funds.
Among the benefits of CDs are that they typically offer a competitive interest rate, and there’s no need to regularly set money aside, since one lump sum deposit is made at the time the CD is opened. 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.
BankFive offers a variety of CD lengths – 6 months, 1 year, 18 months, 2 years, 3 years, and 5 years. A minimum of only $500 is needed to open a BankFive CD, and there are no monthly maintenance fees.
Our 2-year investment CD is a convenient way to put aside money without making a special trip to the bank. Deposits as little as $10 can be electronically transferred from a BankFive checking account on a weekly, bi-weekly, or monthly basis. What’s more, additional deposits of as little as $10 can be made at any time over the two-year period.
On the flip side of the coin, a savings account is an interest-bearing deposit account held at a bank or another financial institution. Distinguishing characteristics may also include:
- A limit on the number of withdrawals you can make from the account each month
- Fees may be charged if you don't maintain a certain average monthly balance in the account
Unlike CDs, a savings account typically can be opened with a deposit of just a few dollars. Subsequent deposits can be made into the account at any time and for any amount. This flexibility comes with a trade-off, however, since interest rates are usually lower than what CDs have to offer.
You can learn more about BankFive's CDs at our Certificates of Deposits page.
And more information about our savings account options, including current rates, is available at our Savings Accounts page.