Certificate Of Deposits And Checking Accounts – Which One Should You Pick?

Back in the day, you could win a lottery or get a huge sum of cash that could be stored in your home or buried in your garden. But, it would only take one robber and/or an unfortunate evening for you to lose all that money, which is why you should be happy that the world now has banks where you can store all your hard-earned money. According to Federal Deposit Insurance Corporation, 95% of American households have at least one person who has a checking or a savings account. However, when it comes to putting your money in a safe place, you have two options: getting a Certificate of Deposits or Checking Accounts.

Yurii/Pexels | The technicalities of banking can confuse just about anyone

However, for someone who is completely new to this, which one do you pick? Which one of them is a better way to save you money safely?

If these are questions that you’re seeking answers to, keep reading this article as you’ll get all the necessary information here. 

What Is A Certificate Of Deposit (CD)?

A certificate of deposit can be defined as an interest-bearing time deposit account in which a person can keep their savings and receive a profit at a fixed interest rate. However, there’s a catch: the money should not be touched until it has completely matured for a certain amount of time! Think of all the times when your parents borrowed a couple of dollars from you and then, after some time, returned it with a few added bucks. Similarly, the banks take your money and pay you back after a certain time with an added interest rate. However, there are certain things that you should keep in mind such as the fact that if you go for an early withdrawal, you can be punished by the law. Your money is completely inaccessible until the term is over, and, sometimes, inflation can turn your profits into losses!

Matthias/Pexels | If these are risks that you can take on then this is for you

These certificates of deposits are present in every bank in one way or the other. But, it’s the terms and conditions that you should take into account. Some banks may have policies that might not work for you while the other banks might have favorable policies! The terms and conditions state the fixed interest rates and also the term that it would take for the deposits to mature.

What Is A Checking Account?

A checking account is the complete opposite of a CD as they’re considered to be liquid. A checking account allows the person to deposit and withdraw at their will! You can come in and access your money whenever you want. Furthermore, the banks that host checking accounts have various perks and benefits. With these accounts, you can also set up a simple direct deposit so you don’t have to worry about cashing a check every month.

However, it comes with drawbacks as well; it offers zero interest, which means that your savings will get no profit. These accounts also have a lot of hidden fees that can add up to a significant amount. 

Pixabay/Pexels | It’s also easy to get carried away when it comes to spending.

So, which account do you think serves you better?