In the inflationary period of recent years, savers have multiple ways to boost their money. Whether they chose a traditional savings account, a certificate of deposit (CD) account or both, savers were able to exploit the elevated interest rate climate to earn more on their money than they would have just a few years earlier. But with inflation falling dramatically in 2024, the benefits of both of these accounts have become less obvious. With one federal funds rate reduction in September, another in November and potentially a third in December, the returns savers can secure with either of these accounts have started to diminish.

With a new year quickly approaching, savers may be wondering which of these accounts will be more beneficial. While the answer to this question can vary depending on the individual saver, there’s a compelling argument to be made supporting CDs over savings accounts going into 2025. Below, we’ll explain why.

Start by seeing how much you could be earning with a top CD rate here now.

CDs vs. savings accounts: Which will be better in 2025?

Not sure which account will provide more benefit for you in 2025? Here are three reasons why a CD may be the better choice:

CDs can have higher interest rates

According to the FDIC, the average savings account interest rate is just 0.43% currently. But they have rates on 6-month CDs averaging 1.68% and 1.84% for 12-month CDs – around four times higher than what’s available with savings accounts. Still, these averages can easily be outpaced by shopping around for lenders online, with many offering rates on either product above 4% now. So it is possible to find a savings account with a better rate than a CD now, but, on average, the latter tends to be higher going into 2025.

Get started with a CD while rates are still high.

CDs have fixed interest rates

Arguably the biggest reason to choose a CD over a savings account going into 2025 is the fixed interest rate the former comes with. CD rates are fixed for the full CD term until maturity, allowing you to earn today’s high rates even if the rate climate continues to cool. Savings accounts, meanwhile, are variable and likely to fall below 0.43% next year. So if the goal is to earn as much interest as possible, it makes sense to forego the regular savings account for a CD instead.

CDs allow for better budgeting

Because of the volatility in the economy now, many may like the security that a fixed CD rate offers when it comes to their budget. As noted, savings account rates change, making it impossible to accurately determine what your money could look like in six or 12 months. But CDs don’t come with that unpredictability, allowing for better budgeting for savers. If you open a 1-year CD at a 4.50% rate right now, you’ll know exactly how much it will be worth next November. The same cannot be said for savings accounts, making them less valuable for a wide swath of savers.

What about high-yield savings accounts?

High-yield savings accounts, on the other hand, offer savers a happy medium in between a regular savings account and a CD. Although rates on CDs have generally been higher than high-yield savings accounts in recent years, they’re now almost identical and, depending on the lender, you may be able to find a higher rate with a high-yield account than a CD.

That all noted, high-yield savings accounts have the same structure as regular savings accounts in that they have a variable rate likely to decline as additional rate cuts are issued. So savers will need to weigh that likely possibility against locking in a high CD rate now instead. 

Learn more about your high-yield savings account options here.

The bottom line

A strong argument can be made for choosing a CD over a regular savings account going into 2025. High-yield savings accounts, on the other hand, could provide the right combination of high rate and flexibility that many savers require in today’s evolving economic landscape. Ultimately, then, the decision between these accounts is a personal one. For many, it may make sense to split the planned deposit amount into both accounts going into 2025 instead.