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CDs vs Online Savings Accounts: Consider Both for Your Savings
Jenius Bank Team
Updated 9/17/2025
• Originally Published 10/4/2023
Saving & CheckingMoney Management
CDs and online savings accounts may help you grow your money over time. Looking for a way to put your money to work and build your savings? There are many types of savings accounts out there but two of the most effective for growing your money are certificates of deposit (CDs) and online savings accounts.Let’s look at some of the key differences between CDs and online savings accounts and help you decide which is right for you.
Key Takeaways
- Both CDs and online savings accounts earn interest on deposits.
- CDs often require you to keep the money in the account for a set period, known as a term, and may charge you a penalty if you withdraw funds before the CD matures.
- Online high-yield savings accounts allow you to access your money at any time, and while rates are generally higher than traditional savings accounts, they still may be lower than CDs.
Overview of Online Savings Accounts and CDs
As we mentioned, CDs and online savings accounts may help you build your savings, but one may be better suited to your saving strategy than the other. Let’s take a quick look at how they work.Online Savings Accounts
Online savings accounts are simply a type of deposit account where you place your funds into the account and withdraw your money as needed. But, given the word “online” in the name, these accounts are typically opened and managed online. These online savings accounts function similarly to the traditional savings account at the bank down the street. Most notably, they earn interest, expressed as an Annual Percentage Yield (APY), which includes the rate itself plus the compound interest the account could earn over a year at that rate.Many online savings accounts are also called high-yield savings accounts because they offer higher than average rates. Keep in mind that saving account rates fluctuate with the market. When rates are on the rise in the economy, you may see an increase in your account’s rate too. When rate environment declines, your account’s rate may drop, too.1Certificates of Deposit
Certificates of Deposit (CD) also earn interest like savings accounts. But, unlike savings accounts, CDs typically require your full deposit upfront. Once you make the initial deposit, you usually can’t add to the balance later on.CDs also require a time commitment, known as a term. You’re expected to leave your money in the account until the CD matures. Longer-term CDs typically have higher rates than short-term CDs, but you may not find that to be true in all rate environments. In exchange for the time commitment, CDs tend to have higher rates than other savings products. Unless you have a no-penalty CD, withdrawing money from your CD before the term ends often results in a penalty. Penalty amounts vary from bank to bank, but many financial institutions set penalties as interest forfeited. For example, some banks may charge a penalty of 90 days of interest meaning you’d lose out on the last 90 days of interest accrued.2Online Savings Accounts vs. CDs: Which Is Right for You?
Now that you understand how online savings accounts and CDs work, let’s compare the two side-by-side.| CDs | Online Savings Accounts | |
|---|---|---|
| Rates of Return | Typically fixed and vary depending on the term length | Variable but typically higher than traditional savings accounts |
| Fees | Typically none, although brokered CDs may require a management fee | Some banks charge a maintenance fee |
| Fund Accessibility | Often a penalty if funds are withdrawn before term ends | Withdrawals permitted at any time. Some banks restrict the number of withdrawals you may make each month |
| Minimum balances | Varies by CD | Varies by bank - Some banks have a minimum balance requirement or tiered rates by balance. |
| Deposits | One deposit to open the account. Ongoing deposits aren’t usually allowed | Allows ongoing deposits |
| Best Suited For | Individuals interested in long-term savings with steady rates of return | Individuals who need easy access to their money |