Edited by Samuel Mountjoy4 Alternatives to CDs
Quick Answer
CDs usually charge early withdrawal penalties. If liquidity is important to you, consider these CD alternatives:
Certificates of deposit (CDs) are low-risk investments that usually offer higher interest rates than traditional savings accounts. CDs could help you earn more money on your savings, but you can expect an early withdrawal penalty if you tap your funds before the CD term ends.
The following alternatives to CDs can provide easier access to your cash, but each option has important pros and cons to consider. The right choice for you will depend on your financial goals and risk tolerance.
1. High-Yield Savings Account (HYSA)
High-yield savings accounts offer higher-than-average annual percentage yields (APYs). That interest can add up over time—and help you grow your emergency fund faster. High-yield savings accounts are available through banks and credit unions, with online banks typically offering the best rates. But every financial institution is different, so it's wise to shop around before opening an account.
Pros and Cons of a High-Yield Savings Account
| Pros | Cons |
|---|---|
| Competitive interest rates: As of February 2026, some APYs are as high as 5%. The average rate on a traditional savings account is just 0.39%, according to the Federal Deposit Insurance Corp. (FDIC). | Variable rates: With a CD, your APY will likely stay the same for the duration of the term. High-yield savings account rates are variable and can drop suddenly if the federal funds rate goes down. |
| Easy access to your money: Unlike CDs, early withdrawal penalties do not apply to high-yield savings accounts. | Potential fees: Some high-yield savings accounts charge bank fees like monthly maintenance fees, overdraft fees and out-of-network ATM fees. Minimum balance requirements may also apply. |
| Low risk: Like a CD, high-yield savings accounts are FDIC-insured for up to $250,000 per depositor, account category and insured bank. The National Credit Union Administration (NCUA) offers similar protection. | Possible withdrawal restrictions: There may be a limit on how many free electronic transfers and withdrawals you can make. Some banks allow up to six per month. |
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2. Money Market Account (MMA)
A money market account blends some of the best features of checking accounts and savings accounts. It allows your balance to earn interest but is also set up for easy withdrawals. For these reasons, a money market account is a CD alternative that may be worth exploring.
Pros and Cons of a Money Market Account
| Pros | Cons |
|---|---|
| Easy access to funds: Money market accounts usually come with a debit card or checkbook, making it easy to withdraw funds as needed. | Lower returns than other investments: You might secure a better APY with a high-yield savings account. If you're comfortable assuming more risk, the average annual return for the stock market has historically been around 10%. |
| Attractive interest rates: As of February 2026, some money market accounts have APYs as high as 4.65%. | Possible opening deposit requirement: Some money market accounts require a minimum opening deposit, which could range anywhere from $2,500 to $100,000. |
| Versatility: You can use a money market account to hold your emergency fund, save for short-term financial goals or cover certain monthly bills. | Minimum balance requirement may apply: In some cases, a bank may require you to maintain a minimum balance to qualify for their highest interest rate. |
3. Bonds
A bond is a type of low-risk debt security. When you purchase one, you're effectively lending money to the issuer, who is obligated to repay you with interest. That may be a corporation, local municipality or the federal government. Bonds are often part of a well-diversified portfolio.
Pros and Cons of Bonds
| Pros | Cons |
|---|---|
| Low risk: It's highly unlikely that you'd lose money with a government bond. The same goes for well-rated corporate bonds, though some high-yield corporate bonds do carry more risk. | Minimal returns: From 1950 to 2025, the annual average total return for bonds was 5.2%, according to J.P. Morgan. That's much lower than the average annual return for the stock market. |
| Could unlock regular income payments: Most government bonds issue fixed interest payments every six months until they mature. | Bonds may be callable: With a callable bond, the issuer can repay the bond early—and cut you off from future interest payments. This might happen when interest rates are declining. |
| Potential tax benefits: Earnings on U.S. Treasury bonds are exempt from state income taxes. Municipal bond interest is often exempt from federal income taxes (and possibly state taxes, depending on where you live). | Subject to inflation: Due to regular inflation, the fixed income you receive from bonds will gradually decrease in value over time. |
4. Treasury Bills (T-Bills)
Treasury bills are low-risk debt securities that mature in one year or less. They're backed by the federal government and pay out a fixed interest rate upon maturity. You can purchase a T-bill at auction at a discount of their face value.
Pros and Cons of Treasury Bills
| Pros | Cons |
|---|---|
| Liquidity: T-bills are designed for short-term investing. You'll get back your initial investment (plus interest) within one year. | Modest returns: As of February 2026, the highest Treasury bill yield was 4.33%. |
| Tax advantages: Interest payments are taxed at the federal level but exempt from state taxes. | Holding period: If you purchase a Treasury security through TreasuryDirect.gov, you'll have to hold it for at least 45 days before selling it. |
| Low-risk: The chance of losing money with a T-bill is slim since they're backed by the full faith and credit of the U.S. government. | Fixed interest rates: If interest rates go up after you purchase a Treasury bill, you'll be stuck with the lower rate until the bill matures. This is known as interest rate risk. |
Frequently Asked Questions
The Bottom Line
CDs can help your money grow faster, but be prepared to sacrifice liquidity. That could present a problem if you end up needing your money sooner than expected. High-yield savings accounts, money market accounts, bonds and Treasury bills can be good alternatives to CDs. They're all considered low-risk investments, but your unique financial situation and goals will determine the right option for you.
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About the author
Marianne Hayes
Marianne Hayes is a longtime freelance writer who's been covering personal finance for nearly a decade. She specializes in everything from debt management and budgeting to investing and saving. Marianne has written for CNBC, Redbook, Cosmopolitan, Good Housekeeping and more.
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