High-Yield Savings vs CDs vs Money Market
Three accounts, one question: how soon do you need it, and what does waiting pay? On $20,000 the spread between the best and worst place to put it is $774 a year.
$20,000 sitting in cash. Left in a typical branch savings account at the national average of 0.38%, it earns $76 over a year. In a competitive account tracking short-term Treasury yields, it earns around $850. The difference is $774, and it has almost nothing to do with which of these three account types you pick.
That is the first thing to settle, because the question people ask is "savings, CD or money market?" and the question that decides the money is "which institution?"
The one question that decides it
On what date might you need this money?
Not when you plan to spend it. When you might need it. Those are different, and the gap between them is exactly what a CD charges you for.
| You might need it | Use | Why |
|---|---|---|
| At any time, including tomorrow | High-yield savings | No penalty, no lock, rate close to the alternatives |
| At any time, and you need cheques or a card | Money market deposit account | Same insurance, slightly more access, often a lower rate |
| On a date you are confident about, over 6 months away | CD of that length | Fixed rate, protected from cuts, penalty if you are wrong |
| On a date over 6 months away, and you are in a high-tax state | Treasury bill | State-tax exempt, which is worth real money above 5% state rates |
The emergency fund belongs in the first row, always. It is defined by not knowing when you will need it, which rules out anything with a penalty: where to keep your emergency fund.
The three, side by side
| High-yield savings | Money market deposit account | CD | |
|---|---|---|---|
| FDIC insured | Yes | Yes | Yes |
| Rate | Variable | Variable | Fixed for the term |
| Access | Transfer out, usually 1 to 3 days | Often cheques and a debit card | Penalty before maturity |
| Minimum balance | Often none | Often several thousand | Usually $500 to $1,000 |
| National average, August 2026 | 0.38% | 0.63% | 1.41% at 6 months, 1.71% at 12 |
| Best for | Emergency fund, sinking funds, anything uncertain | Cash you spend from directly | A known date you will not move |
Two things in that table need pulling out.
The national averages are not what you should be getting. The FDIC's national rates published 17 August 2026 are dragged down by very large banks paying close to nothing on enormous deposit balances. They are a useful floor to compare against, not a target.
Money market deposit accounts are not money market funds. The first is a bank deposit, insured. The second is a brokerage investment, not insured, holding short-term debt. They are both conservative and only one of them carries a federal guarantee.
What each actually pays, and what moves it
Short-term deposit rates track short-term government yields, with a lag and a margin the institution keeps. So the honest way to judge an offer is against the Treasury curve rather than against another bank's advert.
On 18 September 2026, Treasury bill yields on a coupon-equivalent basis were:
| Maturity | Yield |
|---|---|
| 4 weeks | 3.89% |
| 13 weeks | 4.08% |
| 26 weeks | 4.27% |
| 52 weeks | 4.41% |
That is the benchmark. A savings account paying 4.0% is doing a reasonable job. One paying 0.38% is not paying you for the money at all, and one paying 5.5% is either promotional, conditional on hoops, or not a bank.
We are deliberately not naming institutions or quoting their rates. A variable rate quoted in an article is wrong within weeks, and the check takes five minutes: compare the advertised APY with the Treasury row above, and confirm the institution is FDIC insured before you move anything.
$20,000, three timelines, three ways
Interest is ordinary income, so every figure below is shown net of a 22% marginal federal rate.
| Where | Rate | Gross on $20,000 for a year | Net at 22% |
|---|---|---|---|
| Branch savings, national average | 0.38% | $76.00 | $59.28 |
| Money market, national average | 0.63% | $126.00 | $98.28 |
| 12-month CD, national average | 1.71% | $342.00 | $266.76 |
| Competitive high-yield savings | about 4.00% | $800.00 | $624.00 |
| Competitive 12-month CD | about 4.25% | $850.00 | $663.00 |
Read the top row against the bottom two. The choice of institution is worth roughly ten times the choice of account type. Moving from a branch savings account to a competitive one is a $774 decision before tax; moving from competitive savings to a competitive CD is a $50 decision, and it costs you access.
Now by timeline:
Six months. High-yield savings, or a 26-week Treasury bill if you are in a high-tax state. The CD advantage over that period is tiny and the penalty risk is not. On $20,000 the difference between savings and a 6-month CD at competitive rates is a few tens of dollars.
Eighteen months. This is where a CD starts to earn its lock, if and only if the date is firm. A fixed rate protects you from cuts over a period long enough for cuts to happen. If there is any chance you need the money sooner, stay liquid.
Four years. Ask a different question first: should this be in cash at all? Four years is long enough that inflation is the main risk rather than access. If it must be cash, a CD ladder is the usual structure, and the honest arithmetic on whether it beats a savings account is in that piece.
Access, penalties and the fine print
Four things worth reading before you open anything.
The early withdrawal penalty on a CD. Commonly three months of interest on short terms and six to twelve months on longer ones. On an $8,000 three-year CD at 4.15%, six months is $166. Break it in the first quarter and the penalty can exceed the interest you have earned, leaving you with less than you deposited.
Transfer timing. Moving money out of an online savings account to an external checking account typically takes one to three business days. That is fine for an emergency fund and it is not instant, so keep a small buffer in checking: the checking account float.
Rate conditions. Some high rates require a direct deposit, a minimum balance, or a number of card transactions a month. Read what happens if you miss one, because the fallback rate is sometimes near zero.
Automatic renewal on CDs. Most roll into a new term at the prevailing rate unless you act within a short grace period. Diarise the maturity date when you open it.
The tax treatment nobody mentions
Interest from all three is ordinary income, taxed at your marginal rate in the year it is credited, and reported on a 1099-INT. The IRS covers it in Topic 403, interest received.
Two consequences people miss.
A CD longer than a year credits interest annually, so you owe tax on interest you cannot yet withdraw without a penalty. On a large balance that is a cash-flow detail worth planning for.
And Treasury bills are treated differently: their interest is exempt from state and local income tax. In a state with no income tax that is worth nothing, and at a 9.3% state rate it is worth a lot. The comparison, done properly at three state rates, is in Treasury bills against a savings account.
When this does not apply
If the balance is above $250,000 at one bank. Coverage is per depositor, per bank, per ownership category, and the third clause is how a couple can insure far more than $250,000 at a single institution: FDIC insurance limits explained.
If the money is for more than five years away. None of these is the right answer. Cash loses to inflation over that horizon, and the question becomes an investing one: index funds explained.
If you are carrying debt above about 8%. Optimising a 4% account while paying 22.15% on a card is backwards. The FDIC average savings rate is 0.38% and the Federal Reserve puts card accounts assessed interest at 22.15%. Clear the debt first: invest or pay off debt first.
If the account is not at a bank. Some payment and investing apps hold your cash at partner banks and some do not. Pass-through insurance is not the same as the app being insured, and the difference matters when something goes wrong: is money in an online bank safe.
If you need the money this week. Leave it in checking. A three-day transfer to capture $2 of interest is not a trade worth making.
Next steps
- Write down what the cash is for and the earliest date you might need it. That answers the account-type question by itself.
- Find the rate you are currently earning. Most people are wrong about this and it is on your statement.
- Compare it with the Treasury row above. If it is below about 3.5%, the institution is the problem rather than the account type.
- Check the institution is FDIC insured before moving anything, and check the coverage if the balance is large.
- If you open a CD, diarise the maturity date the same day, because it will roll over without asking.
Sources and assumptions. National average rates are the FDIC's national rates and rate caps published 17 August 2026: savings 0.38%, money market 0.63%, 6-month CD 1.41%, 12-month CD 1.71%. Treasury bill yields are coupon-equivalent figures for 18 September 2026 from the Daily Treasury Bill Rates. The "competitive" 4.00% and 4.25% figures are illustrative levels anchored to that curve rather than any institution's published rate, and you must check the current offer yourself. Tax figures assume a 22% marginal federal rate and no state tax; interest is ordinary income per the IRS at Topic 403. Deposit insurance details from the FDIC's are my deposit accounts insured. The 22.15% card rate is the Federal Reserve's G.19 average for accounts assessed interest, July 2026. Checked 20 September 2026.
