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Certificate Accounts vs. Other Savings Accounts


If you have enough money set aside to add funds to a savings account, you're already taking smart steps toward setting money goals, but did you know there are accounts that can help you maximize your savings? Read on to see how certificate accounts stack up against other savings accounts.

Certificates vs. IRAs

It's never too early to start saving for retirement. Here are some things to consider when comparing certificate accounts to individual retirement accounts (IRAs).

Certificate Accounts

With a certificate account, you choose the length of your term (usually, a few months to a few years) and make a required initial deposit at a locked-in rate. Then your money earns dividends throughout the term.

Generally, the longer your certificate term is, the higher your earnings may be, which is great if you're saving for a long-term goal like retirement. When your certificate matures, you can withdraw the principal and interest or even step up your earning potential by laddering your certificate

Recognized as some of the safest investment options — that also offer guaranteed returns — certificate accounts, depending on the account ownership type, are included in the $250,000 that is insured by the National Credit Union Administration (NCUA) for credit union members.

Unlike with IRAs, you don't contribute on a regular basis to most types of certificates (add-on certificates are an exception), and unless you're willing to pay an early-withdrawal fee, you'll leave your money in your account until it matures.


An IRA is an account that's used specifically for retirement savings, can hold investments within it, and offers tax advantages. Whereas a certificate account earns interest over a specific term, an IRA accumulates earnings over the time it takes an investor to reach retirement, and you can make contributions all the while.

In general, IRA returns are determined by how well investments within the account perform. The two most common types of IRAs are traditional and Roth accounts.

With a traditional IRA, you can make potentially tax-deductible contributions. Earnings may potentially grow tax-deferred until you withdraw them, but any withdrawals you make in retirement will be taxable as income.

On the flipside, your contributions to a Roth IRA are taxed (meaning they won't be tax-deductible), however withdrawals in retirement are tax-free. As with traditional IRAs, your funds may potentially grow tax-free.

With certificates, you have the option to open an account jointly — for example, with a spouse or child — while IRAs can only be opened by individuals. Additionally, IRAs typically aren't insured by the NCUA or FDIC. If you want to get the best of both, consider how a certificate is a type of investment that can be held within an IRA.

Certificates vs. Traditional Savings Accounts

Like certificates, traditional savings accounts are offered by banks or credit unions, where they may be referred to as share accounts. Although certificates and savings accounts are both federally insured, there are some differences.

Certificate accounts tend to earn at a lower rate than other types of market investments, such as stocks, bonds, and mutual funds, but savings accounts usually pay interest at even lower rates than certificates.

In contrast to certificate accounts, which have minimum deposits that can be as low as $500, but may also be $1000 or more, you can start a savings account with far less money up front, if anything at all.

You can access savings account funds more easily and frequently than you can access money in a certificate account. A savings account holder can typically make up to six withdrawals or transfers a month, while a certificate holder is generally required to lock in money to an account for the duration of a selected term until maturity. Savings accounts don't have maturity terms.

And because you can access the funds whenever you need them, a traditional savings account can provide a versatile space to grow your savings for a variety of financial needs, from covering short-term expenses to building an emergency fund.

High-Yield Savings Accounts

Wondering if there's a way to stick with a savings account but earn a better return? Consider a high-yield savings account.

With a high-yield savings account, you may potentially earn interest or dividends at a rate that's 10-25 times higher than that of a traditional savings account thanks to a bigger initial deposit. Most often, you can even open a high-yield savings account at the same financial institution where you have your other accounts, making it easier to transfer your money.

Certificates vs. Money Market Accounts

Similar to certificates, insured money market accounts (MMAs) are often seen as a lower-risk approach to saving. Both types of accounts often require a minimum deposit and can be opened at most banks and credit unions.

What's the difference between certificates and money market accounts? For one, MMAs are somewhat like a blend of checking and savings accounts. In fact, you can access the funds in your MMA with an ATM or debit card, check, or electronic transfer.

This kind of accessibility differs from that of most certificates, which again, require you to store your money for a specific term, which often lasts from several months to five or more years.

MMAs also earn interest or dividends, but certificates may potentially earn more. Here are a few other points to keep in mind when considering certificates and MMAs:

Type of Account Rate Fees
Certificates Fixed Early withdrawal
Money Market Accounts May fluctuate Low balance

When It Makes Sense to Open a Certificate Account

Not sure if opening a certificate account can help you meet your unique financial needs? Take a moment to think about your money goals, risk comfort level, and time horizon.

Money Goals

Offering an element of versatility, certificate accounts provide a way to save for specific short- and long-term goals. Common short-term needs you could use a certificate account for include:

  • Events such as a wedding or vacation
  • A new car
  • A down payment on a home

You could also use a certificate to save for long-term needs, such as higher education expenses and retirement funding.

Risk Comfort Level

Considered one of the safest investments, certificates are federally insured. Certificates provide account holders with a low-risk way to save, and they're still likely to earn at a higher rate than savings and money market accounts.

Time Horizon

As a rule of thumb, the longer your certificate term, the higher your rate of return. If you can afford to store your money for the longer term without accessing it, your account may have the chance to grow and earn more.

Remember, no matter your goals, preferences, and time frame, the money you store in a certificate account will most likely earn a guaranteed return.

Certificate accounts, IRAs, savings accounts, and money market accounts all have distinctive features that can help effectively store your savings — and all are offered by most financial institutions. Reflecting on what kind of accessibility you need, how safe of an investment you prefer, and how much you're looking to earn can help you decide which account might serve up the right way to save for you.

Invest in Your Future

Explore certificate accounts to find the best option for you.