When it comes to saving money, many people choose between two common financial tools: certificates of deposit (CDs) and savings accounts. Both options help grow your funds over time, but they work in different ways. 

Below, F&M Bank will guide you through the nuances of certificate of deposit vs. savings account benefits. Understanding the difference between the two can help you determine which one best suits your financial goals.

After you’re finished, head down to your local F&M Bank to open your new savings or certificate of deposit account with us today!  

What is a Certificate of Deposit?

A certificate of deposit, commonly referred to as a CD, is a savings product offered by local and regional banks that locks in your money for a set period of time in exchange for a fixed interest rate. This can range from just a few months to several years, with longer account terms facilitating higher interest rates. 

When you open a CD account, you agree not to withdraw the money until the end of the term (known as the maturity date). Withdrawing money early from a CD means you’re likely to pay a fee for breaking the fixed term. 

Are There Different Kinds of Certificates of Deposit?

While F&M Bank doesn’t offer different types of CDs, we do have variable interest rates* depending on the agreed-upon term for minimum deposits of $1,000 or more:

  • 3 months - 2.00% APY
  • 6 months - 2.00% APY
  • 9 months - 2.00% APY
  • 12 months - 3.25% APY
  • 14 months - 3.25% APY
  • 18 months - 3.00% APY
  • 24 months - 2.75% APY
  • 36 months - 2.50% APY
  • 48 months - 2.50% APY
  • 60 months - 2.25% APY

As you get into the higher term range, you’re able to take one withdrawal of up to 50% of the principal balance after 6 months without penalty. 
*Rates offered change based on the Federal Reserve's federal funds rate and may not be accurate at the time of reading this post. For the most up-to-date rates, visit us here.

Pros and Cons of a Certificate of Deposit

CDs are potent tools that can help you boost your finances. However, they may not be suitable for everyone’s financial ability or flexibility. 

Pros

  • Higher interest rates than standard savings accounts
  • Predictable returns based on a fixed term
  • Flexible term rates
  • Federally insured by the FDIC

Cons

  • Limited access to your funds until you reach the maturity date
  • Early withdrawal penalties
  • May not keep up with inflation rates over long periods

CD account benefits often appeal to savers who are willing to trade liquidity for higher yields in the medium to long term. 

What Is a Savings Account?

A savings account is a deposit account at a financial institution that earns interest but also allows easier access to your money than a CD. It’s ideal for building an emergency fund or setting aside money for short-term or medium-term goals. 

Many savings accounts offer variable interest rates and may include monthly limits on certain types of withdrawals, as mandated by federal regulations. 

Are There Different Types of Savings Accounts?

Yes, financial institutions typically offer a range of savings account options with various benefits for different types of savers. Here at F&M Bank, we offer:

  • Smart Savings - Our standard savings account, Smart Savings, requires a minimum deposit of $50 and offers a 0.25% Annual Percentage Yield (APY).  
  • Youth Savings - Similar to our Smart Savings account, Youth Savings offers the same services and APY with no fee for individuals under 21 years of age.  
  • Performance Money Market - Tied to market performance, you can use a Performance Money Market account to save more aggressively than a typical savings account. There are tiered interest rates tied to higher account balances, incentivizing long-term growth over short-term savings.
  • ICS Money Market -  Insulated from volatile markets, an ICS Money Market account has a higher minimum deposit requirement than other types of savings accounts ($500,000) and offers easier access to funds. 

Contact your local F&M Bank representative to see which type of savings account is right for you. 

Pros and Cons of a Savings Account

While they’re the preferred financial tool for millions of Americans, there are some things to consider when choosing between a savings account and a CD:

Pros

  • Easy access to your money
  • No or low minimum balance requirements
  • FDIC-insured for up to $250,000

Cons

  • Lower interest rates compared to CDs
  • Small monthly maintenance fee
  • Limited transaction capabilities per month (fee past six withdrawals)

These savings account features make them a flexible and convenient option for everyday savers. If you’re planning a rainy day fund or have a short-term financial goal in mind, a savings account might be a better option over a CD. 

Contact Your Local F&M Bank Today!

Still unsure whether to open a savings account or a certificate of deposit? When comparing a savings account vs CD, think about your financial goals, your need to access funds (and how quickly), and your comfort with locking in your money for a set period of time. 

F&M Bank offers competitive rates, personalized advice, and trusted financial products for every type of saver. Contact your local branch today to speak with a financial expert about CD account benefits and savings account features. Give us a call and start your saving journey today!