$20,000 short-term CD vs. $20,000 high-yield savings account: Which earns more now?

It can take an extended period to save a substantial amount of money, such as $20,000. And after reaching that threshold, savers should look for ways to grow and protect it. However, with options like stocks, bonds, real estate, and even alternative assets like precious metals, risk will need to be factored in. In today’s economic climate, where inflation has risen again and high interest rates continue to make borrowing expensive, this risk is difficult to gauge. That’s why many are instead choosing traditional savings vehicles like certificates of deposit (CDs) and high-yield savings accounts. 

Both of these account types come with interest rates many times higher than a traditional savings account, thus making them a way to grow your money in a more guided and secure way. And, with a short-term CD in particular, you won’t be required to forego access to your funds for an extended period as the account will mature in less than 12 months. Before getting started with either, it helps to calculate the interest-earning possibilities both offer right now. Between a $20,000 short-term CD and a $20,000 high-yield savings account, however, which will earn more right now? That’s what we’ll calculate below.

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$20,000 short-term CD vs. $20,000 high-yield savings account: Which earns more now?

It’s simple to calculate CD interest with accuracy as the account comes with a fixed interest rate that will remain the same until the account matures, regardless of what happens in the larger interest rate climate during that period. High-yield savings account earnings are more difficult to determine, however, as the rate the account comes with is variable and will thus adjust based on market conditions. 

Understanding this caveat, then, here’s what both account types will earn with a $20,000 deposit made now, assuming no early withdrawal penalties are issued against the short-term CD and that the high-yield savings account rate remains constant:

• $20,000 3-month CD at 4.40%: $216.46
• $20,000 high-yield savings account at 4.30% after three months: $211.62
• Difference between accounts: The CD earns $4.84 more.

• $20,000 6-month CD at 4.45%: $440.16
• $20,000 high-yield savings account at 4.30% after six months: $425.47
• Difference between accounts: The CD earns $14.69 more.

• $20,000 9-month CD at 4.45%: $663.85
• $20,000 high-yield savings account at 4.30% after nine months: $641.59
• Difference between accounts: The CD earns $22.26 more.
• $20,000 1-year CD at 4.40%: $880.00
• $20,000 high-yield savings account at 4.30% after one year: $860.00
• Difference between accounts: The CD earns $20.00 more.

Not only does the short-term $20,000 CD earn more interest in all of the above scenarios, but that interest is guaranteed versus the high-yield savings account returns, which are unreliable and likely to change if interest rate cuts are issued later this year. In other words, if you’re looking to earn as much interest as you can now and want that return to be guaranteed, a CD is your better option when measured against what a high-yield savings account offers now.

Get started with a high-rate CD account here today.

The bottom line

This summer, a short-term CD offers savers a secure and better way to grow their money when compared to alternatives like high-yield savings, money market and traditional savings accounts, all of which have variable rates likely to change. But CDs require sacrificing immediate access to your funds in exchange for that big return, so that will need to be weighed carefully, too. Still, with potentially hundreds of dollars worth of interest in exchange for that accessibility, it could be the smart move to make for your $20,000 right now.