3 Alternatives To CDs

Are you looking for an easy way to get a better return on your savings but don’t want to deal with the risk or hassle of investing in shares? Then you may want to consider opening a certificate of deposit, or CD. 

CDs are an excellent way to make your money work for you while it’s sitting in the bank. They are insured by the FDIC up to $250,000 per account, so provided you don’t surpass that, you won’t lose value on the principal amount you deposited in your account.

But what should you do if you already have a CD and it’s about to reach its maturity date? Typically, moving your funds into another CD would be the smart choice. This allows you to continue earning even more interest on your funds instead of keeping them in a regular savings account. 

Unfortunately, it seems like more CDs are reducing their interest rates, so rolling your money into a new account may not be the best move anymore. 

If you’re wondering what you should do, check out these CD alternatives from The Ascent.

Savings Accounts

If you used a CD to build and save your emergency fund, you would have to put it somewhere else — though make sure it’s FDIC-insured. Currently, a savings account might be your best option. 

You might find it hard to believe, but CD rates are at an all-time low, which means many savings accounts offer similar rates you would see with a one-year CD. And if you select a short-term CD, you will probably receive a lower interest rate than a standard savings account.

With this in mind, you may consider switching from a CD to a savings account once your funds mature. This way, you can preserve your money’s liquidity, which is important to have during a volatile time like the COVID-19 pandemic. 

CDs require that you save your money for the term. If you take it out before the maturation date, you’ll be hit with a steep penalty that could undo several months’ of interest. 

Each bank has its own charges and restrictions, so it’s difficult to give an exact amount. But if you keep your money in a savings account, it’s available whenever you need it — penalty-free.

Investment Accounts

Many people prefer CDs for their low-risk nature. However, if your goal is to maximize your returns, it might be time for you to consider investing in stocks. 

If the funds in your CD were extra money you didn’t want to deposit in a savings account and weren’t apart of an emergency fund, stocks are a worthwhile option. A brokerage account can offer you a chance to enjoy better returns on your money.

Of course, before you begin your investment journey, you should make sure you have an emergency fund ready. That way, if something does happen, you have the means to get by until the market recovers.

Retirement Plans

An IRA or similar retirement vehicle is an excellent option if you don’t need to use the funds from your CD after they mature. If you opt for a traditional IRA, you will get a tax break. 

On the other hand, a Roth IRA doesn’t offer an immediate tax advantage, but it has fewer restrictions when it comes to withdrawals once you retire.

 Keep in mind that if you want to contribute to an IRA, that money will be unavailable until you reach the age of retirement (unless you want to pay a sky-high penalty). Make sure you can part with your money before making this decision.

Consider Every Option

Keeping additional funds in a CD isn’t necessarily a bad idea, but with current rates as low as they are, you might want to look at other options. Yields for long-term CDs and savings accounts are about the same, so rather than putting your cash in a CD (where you can’t touch it), one of the above alternatives might be a better choice for now.

Two Savings Accounts That Can Give You Great Returns

Keeping your money in the wrong savings account means missing out on valuable savings opportunities. Instead, consider opening a CIT Bank Savings Builder account or an American Express High-Yield Savings Account. 

According to The Ascent, these two banks offer 18 times the national average for interest rates, making them one of the best places to save your hard-earned cash.


  • Brackman, Maurie. “Have a CD Maturing? 3 Things to Do With It.” The Motley Fool, 23 Nov. 2020, www.fool.com/the-ascent/banks/articles/have-a-cd-maturing-3-things-to-do-with-it/.
Ian Schindler