CD vs HYSA: Where Should You Put Your Savings?

In a fluctuating interest rate environment, choosing between a CD (Certificate of Deposit) and a HYSA (High-Yield Savings Account) is the most common dilemma for savers. While both are low-risk, FDRIC-insured options, they serve very different purposes. This CD vs HYSA Calculator helps you see the exact dollar-amount difference between them over time.

The Case for a High-Yield Savings Account (HYSA)

A HYSA is defined by its liquidity. You can deposit and withdraw money almost whenever you want.

• Pros: Full access to your cash, rates often rise quickly when the Fed hikes rates.
• Cons: Rates are "variable," meaning the bank can lower your interest overnight without warning.
• Best for: Emergency funds, house down payments, or money you need within 6 months.

The Case for a Certificate of Deposit (CD)

A CD is a contract with a bank. You agree to leave your money with them for a fixed term (3 months to 5 years), and in return, they give you a guaranteed rate.

• Pros: Fixed rate. If market rates drop, you continue earning your high "locked-in" yield.
• Cons: No liquidity. If you withdraw early, you pay a penalty (usually 3-6 months of interest).
• Best for: Fixed-term goals, or when you believe interest rates are about to fall.

3 Tips for Maximizing Interest Income

1. The CD Ladder: Instead of putting $50k in one 12-month CD, put $12.5k into four different CDs (3, 6, 9, and 12-month terms). This ensures you have cash becoming liquid every quarter while still capturing higher yields.
2. Watch Out for Inflation: If a CD is paying 5% but inflation is 6%, your "real" purchasing power is actually decreasing. In high-inflation environments, consider short-term HYSAs to stay flexible.
3. Tax Implications: Remember that interest earned is taxable income. If you are in a high tax bracket, the "after-tax" yield might be significantly lower than the advertised APY.