CDs, high-yield savings accounts and treasury bills let you earn interest on your money, but which should you choose? (2024)

When deciding where to keep cash, one consideration is how much of a return you can earn on your balance. High-yield savings accounts have quickly become a popular account for keeping cash because of recent high APY earnings and ease of access to your money. Certificates of deposit (CDs) and treasury bills are other options that could keep your money safe while also potentially earning you solid returns.

Of course, they each come with their own set of rules. Below, CNBC Select breaks down what you need to know if choosing between high-yield savings accounts, CDs and treasury bills.

High-yield savings accountslet you earn a higher interest rate on your balance compared to what you'd earn through traditional savings accounts.A higher APY means you'll earnmore interest and your balance will grow even faster. Granted, you likely won't earn hundreds of dollars in interest payments each month but it's still better than nothing.

You can also continue to make contributions to the account regularly to grow your balance and amount of interest earned even faster.

Just keep in mind that the APY you receive can change at any time since these ratesfluctuatein accordance with changes to the Federal Reserve's benchmark interest rate. Even so, you'll still earn more than you would if you were to keep your money in atraditional savings account.

You can still have access to your cash when you need it as you would in a normal savings account.Keep in mind that some accounts may have excessive withdrawal fees or place other limits on how many withdrawals you can make.

The Marcus by Goldman Sachs High Yield Online Savings Account is one savings account option that doesn't charge any excessive withdrawal fees. CNBC Select's best overall-ranked high-yield savings account, the LendingClub High-Yield Savings, also doesn't charge excessive withdrawal fees and doesn't cap the number of transactions you can make. If your main focus is earning a high APY, UFB Secure Savings is also worth considering.

Likehigh-yield savings accounts, certificate of deposit accounts (CDs) allow you to deposit money into an account to earn interest on your balance.

The main difference is that with a CD you'll need to keep your money locked into the account for a specified amount of time. This is known as the term length. Term lengths can range from three months to five years. Usually, the longer the term, the more interest you'll earn since you won't have access to your money for a longer period of time. This means that CD accounts potentially allow you to earn even more interest than a high-yield savings account would.

However, once you deposit money into the account, you need to avoid accessing the money before the term ends or you'll get hit with an early withdrawal penalty. The penalty fees can vary depending on your bank or credit union. Usually, though, it's equivalent to the interest earned, or the interest you would have earned.

Unlike with high-yield savings accounts, where the interest rate can change while your money is in the account, withCDs, the rate you lock in when you make a deposit stays the same throughout the entire term. So if you lock in a low rate during a low-interest rate environment, your rate will stay the same even if interest rates increase during your term. Also, once you make that initial deposit, you can't make additional deposits throughout the account's term length.

Because of this, you gain the most out of a CD account when you can deposit a large lump sum of cash one time, and when you're sure you won't need access to the cash for the entirety of the term length. If you have less money to deposit and know you'll want to make additional deposits over time, a high-yield savings account may be a better choice for you.

Treasury bills are another way to grow your savings without investing money in the stock market. Treasury bills (also known as T-bills) are an asset that gives you a guaranteed return over a specified period of time (called the maturity date). Maturity dates can be as short-term as a few days but the longest timeframe for maturity is just 52 weeks (one year).

Much like with CDs, the longer the timeframe for locking up your money, the more interest you can earn. Unlike with the other options though, you'll know the exact dollar amount of your return before you make the investment. As an example, you might purchase a T-bill with a $1,000 face value for just $900 — the remaining $100 is the "interest" you'll earn. When the T-bill matures, you'll have $1,000.

T-bills are generally considered a safe investment since they're backed by the U.S. government. To purchase a treasury bill, you can either buy it directly from the government on the TreasuryDirect website or you can use a broker like Fidelity or Charles Schwab.

You can purchase T-bills for as little as $100. And the interest you earn on them is exempt from state and local taxes, though you'll still have to pay federal taxes on the interest. The low investment minimum, low risk of default and short time horizon for maturity may make treasury bills an appealing place to park some of your cash.

The return on T-bills tends to have an inverse relationship with inflation and the Federal Reserve benchmark rate. A higher rate set by the Federal Reserve means lower returns on T-bills. By contrast, CDs and high-yield savings accounts tend to give higher returns as the Federal Reserve benchmark rate increases.

Ultimately, deciding between a high-yield savings account, a CD and treasury bills will come down to what the money will be used for. If it's money for an emergency fund, you're better off keeping it in a high-yield savings account since you can access the money at any time without penalty and you can continue contributing to the account over time — unlike with a CD account or treasury bills.

If you're saving for a large purchase — like a home or car — a CD account could make sense for you if you know you can keep the money locked up for a longer time horizon so you can earn more interest. This would let you truly get the most out of a CD account.

If you have a large purchase coming up on a shorter timeline, though, a treasury bill could make sense since returns aren't tied to stock market performance and your money will only be tied up for a maximum of one year. However, you'll want to make sure that the return you'd receive through treasury bills is really worth it. Because they're a less risky asset, returns may sometimes lean toward the more conservative side compared to returns on other assets. A simple high-yield savings account also makes sense in this scenario.

But before even considering an asset like treasury bills, you should have your financial basics covered first. Make sure you have an emergency fund with at least three to six months' worth of expenses saved up. You should also contribute to retirement accounts, including your 401(k) account and any IRA accounts.

You might also want to explore CNBC Select's Savings Marketplace to further consider what kinds of savings vehicles might be best for you. Also, remember to reach out to a financial professional if you're looking for more personalized advice and want to weigh your options as they relate to your own circ*mstances.

High-yield savings accounts, CDs and treasury bills all allow you to earn slightly higher returns on your money than a traditional savings account. Just make sure you understand the pros and cons of each.

High-yield savings accounts provide the easiest access to your money but the interest rate you receive can fluctuate. CDs offer a fixed rate for locking up your money for a fixed period of time, but you'll only earn the highest returns if you choose longer terms. Treasury bills are shorter term and depending on the term you choose, you could lock your money up for as little as a few days or as long as one year.

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