$25,000 CD vs. $25,000 high-yield savings account: Here's which earns more now
Around $481 per week.
That's what you would have to save each and every week for one full year to get to $25,000. And with interest rates on traditional savings accounts under 0.40% right now, you won't be able to count on much interest earned there to help boost your account.
If you've managed to save this amount of money, however, whether over one year or multiple ones, you'll want to make sure it's secured in a suitable, profitable place right now. While a traditional account offers little security or interest earning potential this September, both certificate of deposit (CD) and high-yield savings accounts, however, still can.
That said, rates on each are similar but not identical. And the way interest is accrued on each is different. Before depositing your $25,000 in either, then, it helps to know how much each can potentially earn right now. Below, we'll crunch the numbers.
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$25,000 CD vs. $25,000 high-yield savings account: Here's which earns more now
Calculating the interest on a CD is relatively simple to do, as the account comes with a fixed interest rate that will remain the same through the account's maturity date. High-yield savings account rates, however, are variable and subject to evolve based on market conditions. That means, for example, that rates could change later this month, if a Fed rate cut is formally issued. With that caveat in mind, here's how much each account can potentially earn now with a $25,000 deposit, calculated against today's rates and the assumption that no fees are issued against either account:
- $25,000 3-month CD at 4.25%: $261.49
- $25,000 high-yield savings account at 4.35% after three months: $267.55
- Difference between accounts: The high-yield savings account earns $6.06 more.
- $25,000 6-month CD at 4.45%: $550.20
- $25,000 high-yield savings account at 4.35% after six months: $537.96
- Difference between accounts: The CD account earns $12.24 more.
- $25,000 9-month CD at 4.30%: $801.99
- $25,000 high-yield savings account at 4.35% after nine months: $811.27
- Difference between accounts: The high-yield savings account earns $9.28 more.
- $25,000 1-year CD at 4.25%: $1,062.50
- $25,000 high-yield savings account at 4.35% after one year: $1,087.50
- Difference between accounts: The high-yield savings account earns $25.00 more.
In three of these four examples, the high-yield savings account earns more. But the difference in earnings is not significant (topping out at $25 over one year). And with the interest guaranteed on the CD but with it likely to fall on the high-yield savings account in the months to come, savers will need to consider both account types carefully.
Compare your top high-yield savings account offers here to learn more.
What about money market accounts?
If you're stuck on your choice of a CD account and high-yield savings account for your money, you may want to consider a money market account instead. Top rates on this account type range between 4.30% and 4.40% now, approximately. And unlike CDs and high-yield savings accounts, money market accounts are a bit more flexible, as they come with features like check-writing that the former two do not. That being said, rates here are also variable and not particularly well-positioned for savers now ahead of expected interest rate cuts. So, the question between variable rate products and fixed rate ones is likely to remain prevalent.
The bottom line
Right now, the returns savers can secure with both $25,000 CDs and high-yield savings accounts are considerable. But in a cooling rate climate, the impacts of a variable rate will need to be evaluated closely. For many, the hard work that went into saving $25,000 will only pay off by depositing that money into a CD.