If you suddenly find yourself with extra money sitting in your checking account but are unsure of how to invest these additional funds, it may be time to consider your options.

Two of the most popular short-term savings options are savings accounts and certificates of deposit (CDs). Looking at the benefits of each can help you better understand which option is right for you.

Savings Accounts

Both savings options provide essentially no risk of losing your investment, but the terms of each vary. Savings accounts are deposit accounts that earn low interest rates – anywhere between 0.01% and 1.85%. The average savings account has a 0.06% annual percentage yield, which is far lower than most CDs.

The main advantage of savings accounts lies in their flexibility. Once deposited into a savings account, your funds can be withdrawn at any time. This makes a savings account the ideal solution for investing money that you still need quick access to in the case of emergencies.

Certificates of Deposit

Although savings accounts are ideal for flexibility, CDs are a great option for longer-term savings. Unlike savings accounts, which allow you to withdraw funds as needed, CDs require you to invest for a minimum length of time. This time frame can vary from three months to five years.

Depending on the commitment, CDs offer varying degrees of interest rates. Generally, the longer the commitment the better the return on your investment. Credit unions and online-only banks often provide the best interest rates, as high as 2%. While bank-issued CDs average a much lower rate of 0.78%.

At Common Trust Federal Credit Union, members can take advantage of CD rates at 1.99% with terms up to 12 months. For more information on how to apply for a CD, visit our July CD Promotion page or contact your local branch representative today!