Are you searching for a better saving option to park your money but don't know whether to pick a certificate of deposit or a saving account?
It is always a critical decision when looking for an option to deposit your cash with a bank in Stillwater, MN, or Hudson, WI. Whether you choose a certificate of deposit (CD) or a savings account, the crux of your decision depends on how long you want to leave your money in your account.
A savings account gives you the flexibility to make withdrawals through e-banking in Hudson and Stillwater anytime you need. On the other hand, a CD offers a specific interest rate if you leave it for a certain period without withdrawing. To take a precise call, have a closer look at the differences between them.
What is a Certificate of Deposit (CD)?
It is a time deposit that you can open with an insured bank/credit union at Stillwater, MN, or Hudson, WI, and agree to lock up your funds for a specific term. The term ranges from a few months to several years, and you earn a guaranteed rate of return in exchange.
What is a Savings Account?
A savings account is a regular bank account offered by banks and credit unions in Stillwater, MN, and Hudson, WI, allowing you to earn interest on your savings. You can make six withdrawals per month through bank transfers and telephone transactions. Beyond six transactions, your bank charges a fee of around $5 for each extra transaction you make in a month.
CD Vs. Saving Account
● Accessibility
Your funds are more accessible in a savings account than a CD. You can withdraw money any time you need from a savings account, but your funds stay blocked for a specific timeframe in CD. Therefore, in the case of a CD, if you suddenly need funds for your business, you have no option but to take a business loan in Stillwater/Hudson to meet your requirements.
● Interest Rate/Yield
You get more interest rates in a CD than a savings account. The yield in a savings account is flexible, but it stays fixed for a term in CD.
● Locking Period/Funds Addition
Your funds in a CD are term deposits locked for a specific period. Once you open it, you cannot add funds to it. On the other hand, savings accounts are not term deposit, and it allows you to add funds whenever you need them.
● Financial Goals
A CD is suitable for medium-term financial goals, like a stash of funds you need in three years to buy a car, or an amount for a downpayment, etc. A savings account is best for short-term financial goals or as emergency funds.
● Maintenance Fee
Your bank in Stillwater, MN, or Hudson, WI, can charge a monthly maintenance fee for a savings account. But for a CD, you don't need to pay any fees.
● Minimum Deposit/ Withdrawl Penalties
If you want to open a CD, you have to bear a higher minimum deposit than opening a savings account. In the case of withdrawal, you can conveniently close a savings account, convert it into a checking account for excess withdrawals without any penalty. But, for any early withdrawals of a CD, your bank in Stillwater, MN, or Hudson, WI, will impose penalty fees, wiping out your interest earned.
Conclusion
Bank and credit unions offer, both CD and savings accounts in Stillwater, MN, and Hudson, WI, and both earn you interest. While deciding between them, consider factors that affect your financial needs and your ability to leave funds untouched for a specific duration.
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