CDs, high-yield savings accounts and treasury bills let you earn interest on your money, but which should you choose? (2024)

When deciding where to keep cash, one consideration is how much of a return you can earn on your balance. High-yield savings accounts have quickly become a popular account for keeping cash because of recent high APY earnings and ease of access to your money. Certificates of deposit (CDs) and treasury bills are other options that could keep your money safe while also potentially earning you solid returns.

Of course, they each come with their own set of rules. Below, CNBC Select breaks down what you need to know if choosing between high-yield savings accounts, CDs and treasury bills.

What is a high-yield savings account and how does it work?

High-yield savings accountslet you earn a higher interest rate on your balance compared to what you'd earn through traditional savings accounts.A higher APY means you'll earnmore interest and your balance will grow even faster. Granted, you likely won't earn hundreds of dollars in interest payments each month but it's still better than nothing.

You can also continue to make contributions to the account regularly to grow your balance and amount of interest earned even faster.

Just keep in mind that the APY you receive can change at any time since these ratesfluctuatein accordance with changes to the Federal Reserve's benchmark interest rate. Even so, you'll still earn more than you would if you were to keep your money in atraditional savings account.

You can still have access to your cash when you need it as you would in a normal savings account.Keep in mind that some accounts may have excessive withdrawal fees or place other limits on how many withdrawals you can make.

The Marcus by Goldman Sachs High Yield Online Savings Account is one savings account option that doesn't charge any excessive withdrawal fees. CNBC Select's best overall-ranked high-yield savings account, the LendingClub High-Yield Savings, also doesn't charge excessive withdrawal fees and doesn't cap the number of transactions you can make. If your main focus is earning a high APY, UFB Secure Savings is also worth considering.

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a Member FDIC.

  • Annual Percentage Yield (APY)

    4.40% APY

  • Minimum balance

    None

  • Monthly fee

    None

  • Maximum transactions

    At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account

  • Excessive transactions fee

    None

  • Overdraft fee

    None

  • Offer checking account?

    No

  • Offer ATM card?

    No

Terms apply.

LendingClub High-Yield Savings

LendingClub Bank, N.A., Member FDIC

Terms apply.

UFB Secure Savings

UFB Secure Savings is offered by Axos Bank ® , a Member FDIC.

  • Annual Percentage Yield (APY)

    Up to 5.25%APY on any savings balance; add a UFB Freedom Checking and meet checking account qualifications to get an additional up to0.20%APY on savings

  • Minimum balance

    $0, no minimum deposit or balance needed for savings

  • Fees

    No monthly maintenance or service fees

  • Overdraft fee

    Overdraft fees may be charged, according to the terms; overdraft protection available

  • ATM access

    Free ATM card with unlimited withdrawals

  • Maximum transactions

    6 per month; terms apply

  • Terms apply.

Read our UFB Secure Savings review.

What is a CD and how does it work?

Likehigh-yield savings accounts, certificate of deposit accounts (CDs) allow you to deposit money into an account to earn interest on your balance.

The main difference is that with a CD you'll need to keep your money locked into the account for a specified amount of time. This is known as the term length. Term lengths can range from three months to five years. Usually, the longer the term, the more interest you'll earn since you won't have access to your money for a longer period of time. This means that CD accounts potentially allow you to earn even more interest than a high-yield savings account would.

However, once you deposit money into the account, you need to avoid accessing the money before the term ends or you'll get hit with an early withdrawal penalty. The penalty fees can vary depending on your bank or credit union. Usually, though, it's equivalent to the interest earned, or the interest you would have earned.

Unlike with high-yield savings accounts, where the interest rate can change while your money is in the account, withCDs, the rate you lock in when you make a deposit stays the same throughout the entire term. So if you lock in a low rate during a low-interest rate environment, your rate will stay the same even if interest rates increase during your term. Also, once you make that initial deposit, you can't make additional deposits throughout the account's term length.

Because of this, you gain the most out of a CD account when you can deposit a large lump sum of cash one time, and when you're sure you won't need access to the cash for the entirety of the term length. If you have less money to deposit and know you'll want to make additional deposits over time, a high-yield savings account may be a better choice for you.

Find the best savings account for you: Help your money grow by finding the savings account that offers the best rates and features for you.

What is a treasury bill and how does it work?

Treasury bills are another way to grow your savings without investing money in the stock market. Treasury bills (also known as T-bills) are an asset that gives you a guaranteed return over a specified period of time (called the maturity date). Maturity dates can be as short-term as a few days but the longest timeframe for maturity is just 52 weeks (one year).

Much like with CDs, the longer the timeframe for locking up your money, the more interest you can earn. Unlike with the other options though, you'll know the exact dollar amount of your return before you make the investment. As an example, you might purchase a T-bill with a $1,000 face value for just $900 — the remaining $100 is the "interest" you'll earn. When the T-bill matures, you'll have $1,000.

T-bills are generally considered a safe investment since they're backed by the U.S. government. To purchase a treasury bill, you can either buy it directly from the government on the TreasuryDirect website or you can use a broker like Fidelity or Charles Schwab.

Fidelity Investments

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go®account, but minimum $10 balance for robo-advisor to start investing

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)

  • Bonus

    Find special offers here

  • Investment vehicles

    Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other:Fidelity Investments 529 College Savings; Fidelity HSA®

  • Investment options

    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

  • Educational resources

    Extensive tools and industry-leading, in-depth research from 20-plus independent providers

Terms apply.

Pros

  • No commission fees for stock, ETF, options trades
  • No transaction fees for over 3,400 mutual funds
  • Limited-time special offers
  • Abundant educational tools and resources
  • 24/7 customer service
  • Over 100 brick-and-mortar branches across the U.S. for face-to-face support

Cons

  • Fidelity Go® has a 0.35% advisory fee per year for balances of $25,000 and over
  • Some of Fidelity's mutual funds require reaching specific thresholds
  • Reports of platform outages during heavy trading days

Charles Schwab

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One®Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit

  • Fees

    Fees may vary depending on the investment vehicle selected. Schwab One®Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract

  • Bonus

    None

  • Investment vehicles

    Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One®Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account

  • Investment options

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Extensive retirement planning tools

Terms apply.

Pros

  • $0 minimum deposit for active investing
  • No commission fees for stock and ETF trades and no transaction fees for over 4,000 mutual funds
  • Offers extensive retirement planning tools
  • Users can get on-demand advice from a professional advisor/Schwab expert
  • Robo-advisor Schwab Intelligent Portfolios® available as a no-fee automated service option (with Premium version available for a fee)
  • Trading platform StreetSmart Edge® available for more active investors
  • 24/7 customer support access by phone or chat
  • Charles Schwab offers over 300 brick-and-mortar branches across the U.S. for in-person support

Cons

  • Specific transactions may require commission fee
  • Robo-advisor Schwab Intelligent Portfolios Premium charges a one-time planning fee of $300, then a $30 per month advisory fee. For that price, you get unlimited 1:1 guidance from a CFP, interactive planning tools, plus a personalized roadmap for reaching your goals

You can purchase T-bills for as little as $100. And the interest you earn on them is exempt from state and local taxes, though you'll still have to pay federal taxes on the interest. The low investment minimum, low risk of default and short time horizon for maturity may make treasury bills an appealing place to park some of your cash.

The return on T-bills tends to have an inverse relationship with inflation and the Federal Reserve benchmark rate. A higher rate set by the Federal Reserve means lower returns on T-bills. By contrast, CDs and high-yield savings accounts tend to give higher returns as the Federal Reserve benchmark rate increases.

How to choose between a high-yield savings account, a CD and treasury bills

Ultimately, deciding between a high-yield savings account, a CD and treasury bills will come down to what the money will be used for. If it's money for an emergency fund, you're better off keeping it in a high-yield savings account since you can access the money at any time without penalty and you can continue contributing to the account over time — unlike with a CD account or treasury bills.

If you're saving for a large purchase — like a home or car — a CD account could make sense for you if you know you can keep the money locked up for a longer time horizon so you can earn more interest. This would let you truly get the most out of a CD account.

If you have a large purchase coming up on a shorter timeline, though, a treasury bill could make sense since returns aren't tied to stock market performance and your money will only be tied up for a maximum of one year. However, you'll want to make sure that the return you'd receive through treasury bills is really worth it. Because they're a less risky asset, returns may sometimes lean toward the more conservative side compared to returns on other assets. A simple high-yield savings account also makes sense in this scenario.

But before even considering an asset like treasury bills, you should have your financial basics covered first. Make sure you have an emergency fund with at least three to six months' worth of expenses saved up. You should also contribute to retirement accounts, including your 401(k) account and any IRA accounts.

You might also want to explore CNBC Select's Savings Marketplace to further consider what kinds of savings vehicles might be best for you. Also, remember to reach out to a financial professional if you're looking for more personalized advice and want to weigh your options as they relate to your own circ*mstances.

Compare offers to find the best savings account

Bottom line

High-yield savings accounts, CDs and treasury bills all allow you to earn slightly higher returns on your money than a traditional savings account. Just make sure you understand the pros and cons of each.

High-yield savings accounts provide the easiest access to your money but the interest rate you receive can fluctuate. CDs offer a fixed rate for locking up your money for a fixed period of time, but you'll only earn the highest returns if you choose longer terms. Treasury bills are shorter term and depending on the term you choose, you could lock your money up for as little as a few days or as long as one year.

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Read more

These top high-yield savings accounts could earn you over 12X more money than the national average

These top CDs offer APYs that are more than 4X the national average

High-yield savings account vs. a CD: What's the difference?

You can earn higher interest rates with a CD than a traditional savings account—here's how they work

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

CDs, high-yield savings accounts and treasury bills let you earn interest on your money, but which should you choose? (2024)

FAQs

Is it better to buy CDs or treasury bills? ›

Choosing between a CD and Treasuries depends on how long of a term you want. For terms of one to six months, as well as 10 years, rates are close enough that Treasuries are the better pick. For terms of one to five years, CDs are currently paying more, and it's a large enough difference to give them the edge.

What is better, a high yield savings or a CD? ›

If you value liquidity and immediate access to the funds, you're better off with a high-yield savings account. If you're building longer-term savings for a mortgage or some other purchase, then a CD may be the better option.

Are CDs the best way to earn interest? ›

In exchange, the bank pays you a fixed annual percentage yield (APY), making CDs a safe, reliable way to grow your money. CDs often earn higher interest rates than savings accounts and money market accounts, but they aren't as liquid.

What is the biggest negative of putting your money in a CD? ›

Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned. In some cases, it could even be all the interest earned, negating your efforts to use a CD for savings.

Do you pay taxes on Treasury bills? ›

Interest income from Treasury bills, notes and bonds - This interest is subject to federal income tax, but is exempt from all state and local income taxes.

Can Treasury bills lose value? ›

Treasury bonds, notes, and bills have no default risk since the U.S. government guarantees them. Investors will receive the bond's face value if they hold it to maturity. However, if sold before maturity, your gain or loss depends on the difference between the initial price and what you sold the Treasury for.

Are CDs safe if the market crashes? ›

Market Crashes and CDs

Even if the market crashes, your CD is still safe. Your interest rate won't change, and your money is still insured. But, keep an eye on interest rates. After your CD term ends, you might find that new CDs have lower rates if the economy is still struggling.

Why is my CD losing money? ›

A Certificate of Deposit (CD) could lose money if funds are withdrawn early, incurring penalties that may exceed earned interest. CDs are generally low-risk and guarantee a fixed interest rate for the term. Early withdrawal penalties can sometimes reduce the principal, not just the interest.

Do you pay taxes on CDs? ›

Key takeaways. Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.

Can you lose money in a high yield CD? ›

Bottom line. Losing money in a CD is highly unlikely. However, it's not impossible. If you're thinking about opening one, read the fine print about early withdrawal penalties, and be sure to compare more flexible options that don't have a maturity date.

How much does a $10,000 CD make in a year? ›

Earnings on a $10,000 CD Over Different Terms
Term LengthAverage APYInterest earned on $10,000 at maturity
1 year2.60%$263.12
18 months2.22%$338.29
2 years2.08%$424.40
3 years1.95%$601.95
3 more rows

Can CDs be inherited? ›

You can inherit a CD in several different ways. If you are the joint owner of a CD and the other owner passes away, you'll automatically get full access to it. If you are named as the payable-on-death beneficiary of a CD, you'll need to contact the bank or credit union that holds it in order to claim the money.

What is a better investment than Treasury bills? ›

Treasury bonds—also called T-bonds—are long-term debt obligations that mature in terms of 20 or 30 years. They're essentially the opposite of T-bills as they're the longest-term and typically the highest-yielding among T-bills, T-bonds, and Treasury notes.

Why are CDs yielding more than Treasuries? ›

A higher rate set by the Federal Reserve means lower returns on T-bills. By contrast, CDs and high-yield savings accounts tend to give higher returns as the Federal Reserve benchmark rate increases.

What is the current 1 year T bill rate? ›

Basic Info

1 Year Treasury Rate is at 5.07%, compared to 5.13% the previous market day and 5.27% last year.

What are the pros and cons of buying Treasury bills? ›

Pros and Cons of T-Bills

T-bills pay a fixed rate of interest, which can provide a stable income. However, should interest rates rise, the existing T-bills fall out of favor since their return is less than the market.

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