A 4% CD vs. a 4% HYSA: Which Actually Earns You More?

At first glance, a 4.00% APY certificate of deposit (CD) and a 4.00% APY high-yield savings account (HYSA) seem like they'd earn you the same amount of interest.

But they don't.

That's because CDs offer a fixed interest rate for the entire term. And HYSAs come with variable rates that can rise or fall at any time.

With interest rate cuts likely coming very soon, here's a quick refresher on how APYs work -- and how to choose the right spot for your cash.

Understanding APYs

First things first: annual percentage yield, or APY, is the annual return on your money. So it assumes your money stays put for an entire year -- with no changes.

But that's rarely how things play out.

With an HYSA, you might earn 4.00% APY today, but that could drop to 3.75% in a week or so if the Fed cuts interest rates (right now, that's looking likely).

CDs work differently. The rate is locked in for the entire term. So a 12-month CD at 4.00% APY guarantees you'll earn exactly that 4.00% return on your money for the full 12 months.

Why CDs may earn more this coming year

Right now, experts are predicting three rate cuts before the end of 2025.

With a CD, your rate is "locked in." So you're guaranteed to earn the full APY for the entire term, no matter what the Fed does. That predictability means you'll know exactly how much interest your money will earn.

Here's what a 12-month CD at 4.00% APY looks like with different deposit amounts:

Of course, this assumes you leave the money untouched for the full 12 months.

If you need to pull funds early, most banks will charge a penalty. This can be a few months' worth of interest or more.

When an HYSA could outperform a CD

High-yield savings accounts are more flexible. You can add money, withdraw funds, or transfer as needed.

That flexibility can work in your favor throughout the year.

Some top HYSAs right now offer APYs as high as 4.00% or more. And even though the rate is variable, they can earn more than a CD if:

• Interest rates rise (unlikely, but not impossible)
• You regularly add more savings to the account
• You only plan to keep your cash parked for a few months

For example, if you deposit $10,000 today and slowly build your balance over the next year, your total interest could outpace a CD, even if rates dip slightly.

Plus, you're not locked in, which can feel safer if you're unsure about your timeline.

Personally, I keep my emergency fund in an HYSA for this exact reason. I'd rather earn a little less than risk paying a penalty when life throws a curveball.

When to use one over the other

Here's a simple way to think about it:

Use a CD for money you don't need soon and want to grow at a guaranteed rate.

Use an HYSA for cash you might need in the near term or want to keep liquid.

It's not a one-or-the-other decision. In fact, a mix of both can work really well. Keep some of your money locked in earning a fixed rate, while the rest stays flexible and accessible.

Don't wait -- rates will likely drop soon

Whether you're team CD or team HYSA, one thing's pretty clear: APYs have likely peaked.

If you're eyeing a CD, now's the time to lock it in. And if you're not already earning a top-tier rate on your savings, open a high-yield account while rates are still holding strong.

Don't let your money sit around doing nothing. Put it to work while it can still earn.

Compare the best CD rates and terms here, and lock in a 4.00% APY today.