Here's Why It Doesn't Make Sense to Have a CD Right Now

Earning interest is a great way to boost your income, but choosing a bank account that meets your needs is essential.

In today's economy, many people are prioritizing their savings goals. Storing extra money in an interest-earning bank account is an excellent way to boost your income while having funds set aside for future expenses. Not all bank accounts are the same, so where you put your extra money matters. Keep reading to learn why it may not be best to store your spare cash in a CD.

A CD earns interest, but has restrictions

A certificate of deposit, also known as a CD, is a bank account that earns interest, and typically these accounts offer attractive interest rates. However, when opening this type of account, you must agree to leave your money in your account for a specific time.

While CD terms vary, most banks require customers to keep their money in the bank for anywhere from six months to five years. You can find many CDs that offer 1-year terms.

If you withdraw your money before the CD term is up, you can expect to pay penalties. If you want access to your money and don't want to agree to a lengthy term, this may not be the best type of bank account for you.

It's worth noting that most CDs lock in the interest rate throughout the term. That can be a win if interest rates decrease during that time. However, you're at a disadvantage if interest rates continue to rise.

High-yield savings accounts may offer similar interest rates

You may want to go a different route than a CD. At this time, many of the best high-yield savings accounts are offering attractive rates, and those rates aren't too far off from current CD interest rates. That means you could earn interest without worrying about withdrawal restrictions.

With a high-yield savings account, if an emergency expense comes up, you have the flexibility to withdraw your money without paying penalties. For this reason, many people use high-yield savings accounts for their savings needs.

With this type of bank account, interest rates aren't locked in. If rates increase, you'll be at a disadvantage. But many banks have continued to raise interest rates over the last few months.

A high-yield savings account may be the best choice if you want to earn interest on your savings contributions, but also want the flexibility to access your money if necessary.

Don't miss out on the chance to earn interest

It's important to remember that most checking accounts don't earn interest. That means if you're storing all your money in your checking account, you're missing out on the chance to make extra money from the interest.

For those wondering how much money you should keep in your checking account, it may be less than you think. Consider leaving some extra cash in your checking account, and then moving the rest into an account that earns interest so you can boost your bank account balance.

Any extra income makes a difference in today's expensive world and can improve your personal finance situation. If you want to earn interest on your money and want full control over when and how you use your money, check out our list of best high-yield savings accounts to learn more.