Where Should You Keep Your Money?


  • A checking account is a tool for spending, while a CD is an interest-earning bank account.
  • Checking accounts usually have lower minimum opening deposits than CDs.
  • The best place to keep your money right now may depend on when and how you want to use it.

Certificates of deposit (CDs) and


checking accounts

are two types of bank accounts widely available at financial institutions. But where should you be keeping your money right now?

We’ll compare the two accounts, so you can weigh out your options and see if one of these accounts might be ideal for you right now.

CD vs. checking account: At a glance

CDs and checking accounts have different features and accessibility. Your best option will likely depend on how you plan to use the account.

  • A checking account is a bank account that provides easy access to your money for spending.
  • A CD is an interest-earning bank account where you’ll need to keep the money untouched for a set time.

What is a CD?

A CD is a type of savings account. You’ll make a one-time deposit, and money will need to stay in the account for a set time to earn interest.

Many banks and


credit unions

offer a variety of CD terms. Once you’ve selected a term, that’s how long you’ll keep money in the account.

CDs usually have a fixed interest rate, meaning you’ll earn the same interest until your bank account matures. If you take out money before the end of your term, you may have to deal with early withdrawal penalties.

CDs will often have higher minimum opening deposits than checking accounts. Most banks require an initial deposit of $1,000.

You might consider putting money into a CD instead of a checking account if you’d like to earn interest on your money and you don’t need to access it.

Should you open a CD?

Kevin Mahoney, a CFP® professional and the host of Financially Well, a finance podcast for Millennials, recommends looking at what you have in your current bank account and considering how it is being used.

“Based on those answers, then you can much better evaluate whether a CD makes sense for you, and if so, what duration of the CD,” says Mahoney.

CD rates

have steadily gone up throughout 2022 as the


Federal Reserve

has raised the federal funds rate. However, Mahoney advises people not to act too hastily when making a decision to open an account.

“Those numbers can be very appealing on the surface, but you have to think through when you’re going to need the money and whether the terms of any particular CD work for your circumstances,” says Mahoney.

How to open a CD

First, you’ll need to select a CD term. CD terms may be as short as a week or as long as 10 years. Most banks and credit unions offer a variety of terms to choose from.

Once you’ve chosen your financial institution and term, you may open a CD online or at a branch.

If you open an account online, you’ll usually be asked to share your social security number and personal information to verify your identity. Meanwhile, at a branch, you’ll present two forms of identification.

What is a checking account?

The purpose of a checking account is to utilize the account for your expenses. Checking accounts allow you to easily withdraw, deposit, or transfer money. These bank accounts also usually have a debit card attached for ATM access and purchases.

Some bank and credit unions charge common bank fees on checking accounts. For example, you may have to pay a monthly service fee if you don’t maintain your account balance, or you might be charged an overdraft fee if you have a negative account balance.

When you’re opening a checking account you may be asked for an initial deposit. Banks may require a minimum opening deposit of between $0 and $100.

You may prefer a checking account to a CD if you’d like a bank account with easy access to your money. It also might be an ideal option if you don’t have a lot of money for an initial deposit.

Should you open a checking account?

In terms of checking accounts, Mahoney says your cash flow will likely sway how much you’ll keep in your account right now. Mahoney also adds you may want to keep more money that’s easily accessible.

“Give yourself a little bit of a buffer so that if your costs continue to increase because of inflation, or any other number of dynamics occur in the economy and with our financial system, that you’ve given yourself the chance to, to kind of keep your head above water,” Mahoney explains. “Maybe that’s a larger emergency account than normal or keeping more in your checking account than you might otherwise do.”

How to open a checking account

You may open a checking account online or at a branch. If you open an account online, you’ll usually be asked to share your social security number and personal information to verify your identity. At a branch, you’ll present two forms of identification.

Financial institutions may also deny you from opening a checking account with them if you have a negative banking history. In this situation, you might consider opening a second chance bank account, so you still have access to banking services.

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