Is a CD or a high-yield savings account better?

It depends on your priorities. A CD (Certificate of Deposit) typically offers a higher fixed interest rate than a savings account in exchange for locking your money up for a set term. A high-yield savings account offers more flexibility — you can withdraw or add money anytime — but the rate is variable and can drop when the Federal Reserve cuts rates. If you are certain you will not need the money during the CD term and the CD rate is meaningfully higher, the CD wins. If you need liquidity or expect rates to rise, the savings account is the safer choice.

What happens if I withdraw money from a CD early?

Most CDs charge an early withdrawal penalty, typically expressed as a number of months of interest. Common penalties are 3 months of interest for a 12-month CD, 6 months for a 24-month CD, and 12 months for 5-year CDs. The penalty is deducted from the interest earned (and in rare cases from principal if interest is insufficient). Some banks offer 'no-penalty CDs' that waive this fee in exchange for a slightly lower rate. If you break a CD early, the penalty can wipe out most or all of the rate advantage over a savings account.

How is interest calculated for the comparison?

Both scenarios use monthly compounding at the entered Annual Percentage Yield (APY). The savings scenario assumes the rate stays constant for the full CD term, which is unlikely in real life — savings rates fluctuate with the Federal Reserve's benchmark rate. The CD rate is locked for the full term. The comparison calculates total interest earned, final balance, and for the CD scenario, the penalty-adjusted value if you withdraw early. The break-even penalty is the number of months of interest you could lose before the CD underperforms the savings account.

Are CD and savings account interest taxed differently?

No. Both CDs and high-yield savings accounts generate interest income that is taxed as ordinary income at your federal marginal rate, plus state income tax if applicable. The interest is reported on Form 1099-INT each year it is earned (or credited), even if you leave it in the account. For multi-year CDs, some banks credit interest annually, so you owe tax each year even though you cannot access the funds without penalty. Treasury CDs (purchased from treasury.gov) are exempt from state income tax, which can be a meaningful advantage in high-tax states.

What is the difference between APY and APR?

APY (Annual Percentage Yield) reflects the effective annual return after compounding, while APR (Annual Percentage Rate) is the simple periodic rate annualized without compounding. A 5.00% APR compounded monthly produces a 5.12% APY. Savings accounts and CDs are required by U.S. law to disclose APY, which makes comparison straightforward. This calculator uses APY for both scenarios to ensure an apples-to-apples comparison. If your bank quotes an APR, convert it to APY first (or use an online converter) before entering it here.

Should I ladder CDs instead of buying one CD?

A CD ladder splits your money across multiple CDs with different maturities (e.g. 1-year, 2-year, 3-year, 4-year, 5-year). As each CD matures, you reinvest it at the longest maturity, capturing higher long-term rates while maintaining regular liquidity windows. Laddering reduces interest rate risk and provides periodic access to funds without early-withdrawal penalties. This comparison models a single CD vs a savings account, but if you have a large deposit, a ladder is typically the better strategy. You can model each rung of the ladder separately using this tool.

Savings Account vs CD Comparison

A savings account vs CD comparison tool is a free online tool that compares high-yield savings accounts against certificates of deposit. It shows interest earned, liquidity, and early withdrawal penalties. Free, no sign-up required.

Savings vs CD Inputs

Deposit Amount?Enter your deposit amount.

Savings APY?Enter your savings apy.

CD APY?Enter your cd apy.

CD Term?Enter your cd term.

Early Withdrawal Penalty?The penalty for withdrawing funds before maturity.

End of inputs

Savings Account vs CD

Metric	Savings Account Variable APY, withdraw anytime without penalty.	Certificate of Deposit Fixed APY for 12 months; penalty if broken early.
Final Balance	$10,450.00	$10,500.00
Total Interest Earned	$450.00	$500.00
APY	4.50%	$10,377.78
Liquidity	Withdraw anytime	$122.22

CD earns $50.00 more at maturity. CD net after early-withdrawal penalty: $10,377.78.

Key Insights

The CD earns $50.00 more than the savings account if held to maturity (12 months).

If you break the CD early, you can lose up to 1.2 months of interest before the CD underperforms the savings account.

Your 3-month penalty exceeds the break-even point — if you withdraw early, the savings account would have been the better choice.

Use the CD for money you are confident you will not need before maturity; use the savings account for emergency funds or irregular expenses.

Guide

How to Use This Calculator

1Enter your deposit amount — the lump sum you would put into either the savings account or the CD.
2Set the savings account APY (currently 4.00% to 5.00% for high-yield online savings accounts as of late 2025; check your bank's current rate).
3Set the CD APY. CD rates are usually higher than savings rates for the same term, especially for 12-month and longer CDs.
4Choose the CD term in months. Common terms are 6, 12, 18, 24, 36, 48, and 60 months. Longer terms usually pay higher rates but lock your money up longer.
5Adjust the early withdrawal penalty (default 3 months of interest; typical range 3 to 12 months). This is the cost of breaking the CD early.
6Review the side-by-side comparison: total interest earned, final balance, and the break-even penalty for the CD. The AI insight explains when each option wins.

Formula

How It's Calculated

Compound Interest with Monthly Compounding

Both the savings account and the CD compound interest monthly at
the entered Annual Percentage Yield (APY).

Monthly rate from APY:
  r_monthly = (1 + APY)^(1/12) - 1

Future value after N months:
  Final Balance = Deposit x (1 + r_monthly)^N

Total interest earned:
  Interest = Final Balance - Deposit

CD early-withdrawal penalty:
  Penalty = Deposit x r_monthly x PenaltyMonths
  CD Net (if broken early) = Final Balance - Penalty

Break-even penalty (months of interest the CD could lose and
still match the savings account):
  BreakEvenMonths = (CD Final - Savings Final) / (Deposit x r_monthly_cd)

CANONICAL SCENARIO:
  $10,000 deposit, 4.50% savings APY, 5.00% CD APY, 12-month term,
  3-month early withdrawal penalty
  -> Savings interest: ~$460
  -> CD interest: ~$512 (if held to maturity)
  -> CD net if broken at month 6: ~$384 (penalty wipes out advantage)

Glossary

Key Terms

FAQ

Frequently Asked Questions

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