HYSA vs CD: What’s the difference?

Both High Yield Savings Accounts (HYSAs) and Certificates of Deposit (CDs) are great savings vehicles that are generally seen as safe investments, especially in times of high market volatility. It’s important, however, to understand how they work, as they serve different purposes and offer distinct features. A High Yield Savings Account is similar to a traditional savings account, but with a higher rate of return. Just like your usual savings account, a HYSA offers you the flexibility of easy and immediate access to your funds. It does not have any time limits that lock in your money, allowing you to deposit and withdraw cash whenever you need it. However, the interest rate you will receive for your HYSA will fluctuate with the current market offerings. Certificates of Deposit, on the other hand, offer a guaranteed rate of return for the lifetime of the certificate, but you are required to keep your money locked in the account for a specific amount of time, which can range from a few months to several years. Determining which account is more beneficial depends on your individual needs. If you value liquidity and the ability to access your savings at any time, a HYSA may be the better choice. However, if you have a specific savings goal and don’t need immediate access to your funds, a CD’s guaranteed rate of return can be advantageous.

How to take advantage of HYSA savings?

HYSA: Pros Here are some of the pros and cons of this type of account, and a few examples of how you could use it to reach your savings goals. Flexibility: With a High Yield Savings Account, you can deposit and withdraw funds as needed, giving you the freedom to adapt to unexpected expenses or changes in financial circumstances. Easy and immediate access: Unlike a CD, a HYSA allows you to access your money whenever you need it without any penalties. No time limits: There are no restrictions on the duration of your savings, making HYSAs ideal for short-term goals or emergency funds. HYSA: Cons Rate of return may fluctuate: Since interest rates can change based on market conditions, the rate of return in your High Yield Savings Account may vary. Possible balance requirements: Depending on the institution, some HYSAs require a minimum balance to be maintained to avoid fees.

How to take advantage of Certificate of Deposit savings?

CDs: Pros Guaranteed rate of return: CDs provide a fixed interest rate for the duration of the certificate, providing a predictable return on your investment. Typically, no monthly fees: Unlike some savings accounts, CDs often come with no monthly fees, allowing you to maximize your savings. CDs: Cons Limited accessibility: Once you deposit funds into a CD, you cannot withdraw the money until the certificate matures without incurring penalties. Subject to inflation risk: Unlike a HYSA, a CD locks your money in to a set rate, so if interest rates decrease before the certificate matures, the money you have invested may lose some purchasing power if the gains are not in correspondence with inflation.

Federal Rate Changes and Your High Yield Savings Account

At the end of July, the Federal Reserve (or “The Fed”) announced there would once again be no change to the federal funds rate, effectively keeping it in a range between 5.25-5.50 percent.

The Fed – which is mandated by Congress to maintain economic and financial stability – is still contending with the effects of COVID-19 on the financial system. In March 2020, it dropped the federal funds rate to a low of 0-0.25 percent to help bolster the economy. In efforts to mitigate the 40-year-high inflation that followed, it then aggressively raised rates 11 times in 2022 and 2023. As inflation cooled, the Fed chose to keep rates steady during four rate-setting meetings in 2023 and throughout its meetings in 2024.

What is the federal funds rate?

The federal funds rate is the interest rate that banks charge when they lend money to each other. It’s set by the Federal Open Market Committee (FOMC), the monetary policymaking branch of the Fed, which meets periodically throughout the year.

How the federal rate shift impacts banks

In a high rate environment, getting a loan from a bank will generally cost more, but banks typically raise the Annual Percentage Yield (APY) on their high-yield savings accounts (HYSAs). The APY is a standardized rate of return showing how much you can earn with compounded interest over the course of a year. If you’re in a financial position to contribute more to your savings, this environment could present a financial opportunity.

What is Annual Percentage Yield (APY)?

Federal rate changes and your Laurel Road High Yield Savings® account

When it comes to high yield savings accounts, Laurel Road offers competitive rates that are consistently higher than the national average, helping you maximize your savings potential and reach your financial goals sooner. Plus, unlike other banks, our high yield savings account does not require a minimum balance and has zero monthly maintenance fees.

Here are answers to some other questions you may have about your Laurel Road High Yield Savings® account and fluctuating rates:

Why did you change the rate on my high yield savings account?

High-yield savings account rates are variable and can change at any time. Some banks may have slightly higher rates, but they also require minimum deposits. We’re adjusting our high yield savings rate to align with other banks in the market space.

Will the rate on this account change again?

Our high-yield savings account is not a fixed rate and is subject to change at the bank’s discretion. While the rate on this account has been stable for the last 12 months, changes within the rate environment as well as the banking marketplace could lead to changes in the future rate offered by Laurel Road.

What is the “Annual Percentage Yield Earned (APYE)” on my monthly statement and why is it different from the APY advertised on the website?

The annual percentage yield earned (APYE) shown on your statement is an annualized rate of return that reflects what you actually earned during the statement period. If the APY on your account has changed during the statement period, then the APYE will reflect those changes.

For example, if the APY was 3.00% on March 1 and then changed to 3.50% later in March, then the APYE shown on your March statement would be between 3.00-3.50%. Two important pieces of the APYE calculation are the average daily balance in your account and the amount of interest you earned in that period. Therefore, the APYE will be affected by deposits and withdrawals made during the statement period.

Where can I see the rate on my high yield savings account?

You can find your Annual Percentage Yield Earned (APYE) on your monthly statement by accessing “Statements & Documents” in online banking, or you can contact us by calling (833) 427-2265 or emailing [email protected] for assistance. For TTY/TRS (for the hearing impaired), dial 711. The Annual Percentage Yield (APY) can be found on laurelroad.com here.

More information about HYSAs

For information about HYSAs, savings strategies, and budgeting guidance, visit our Building Your Savings content collection, and use the calculator below.

High Yield Savings Calculator

Estimate how much interest you could earn with a Laurel Road High Yield Savings account compared to the national average APY for other savings accounts.

Initial Deposit Amount

Monthly Deposit Amount

Save for 10 Years

1 Yr

10 Yr

Interest You Could Earn

Your Total Contributions $0

Potential Future Balance $0

Potential Interest Earned $0

Laurel Road (3.80% APY)

National Average (0.38% APY)

This calculator is for illustrative purposes only. Calculations are estimates of expected interest earned and actual results may vary, based on various factors such as leap years, timing of deposits, rounding, and variation in interest rates. Calculated values assume that principal and interest remain on deposit and are rounded to the nearest dollar.

All APYs are subject to change at any time before or after account opening. Laurel Road Annual Percentage Yield (APY) as of XX/XX/XX. National average APY reported by reported by the FDIC as of XX/XX/XX.

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