Difference Between Certificate of Deposit and Saving Account

Edited by Diffzy | Updated on: April 30, 2023


Difference Between Certificate of Deposit and Saving Account

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Certificate of deposits and savings account are terms related to bank deposits. However, one key distinguishing feature is their flexibility. Savings accounts hold money that can be accessed by the individual owning the account at any period of their choice. A certificate of deposit requires the individual to maintain the amount within the bank for a stipulated period, and cannot be reversed on-demand as it could lead to the individual having to pay for pre-mature retrieval of money.

Certificate of Deposit vs. Saving account

A savings account is issued to any customer with the necessary documents and does not involve risks. The individual will be provided a debit card by the respective bank to withdraw or deposit the required amount of money at any given point in time. As per the financial regulatory body of India, The Reserve Bank of India, interest for saving accounts is deposited quarterly, preferably on the last day of every quarter. Savings accounts can be issued by all banks to individuals who fit the required criteria. However, a certificate of deposit is not as easily accessible as a savings account. Not all banks provide a certificate of deposit as well. Identical to a savings account, a certificate of deposit and its rules are governed by the Reserve Bank of India. The certificate of Deposit involves a fine being imposed on the individual if they withdraw the amount before the period required for the amount to mature as per the pre-set rules and cannot be easily withdrawn as in a savings account.

Difference Between Certificate of Deposit and Saving Account in Tabular Form

Parameters of Comparison Certificate of Deposit Saving Account
Definition A certificate of Deposit is a monetary aid qualifying the holder/individual to gain a high amount of interest depending on the proportion of their deposit and the time of deposit before which it can be withdrawn without being levied any charges. A savings account is a form of bank account an individual with a typical bank account can have access to as well as withdraw the amount deposited in the bank account at any given time they choose without being governed by rules regarding the maturation period.
Liquidity For the individual to have access to the money deposited utilizing a Certificate of Deposit, they must await the maturation period to come to an end. Failure to follow the rules of awaiting period or pre-mature withdrawal could lead to the individual having to pay an extra amount of money to the bank for not sticking by the stipulated period. Hence, the rate of liquidity of a Certificate of deposit is lower as one cannot have access to the money of free will. A saving account gives the individual owning the bank account total custody to make decisions regarding the withdrawal and deposition of money. The individual can have access to their money via debit cards, signed cheque leaves, and any other form of record on demand. Hence, the rate of liquidity of a saving account is much higher.
Interest rates The interest rates applied on the Certificate of deposit may vary between institutions. Generally, short-term CDs attract a higher amount of interest than long terms CDs. The interest rates applied on a saving account are a lot more marginal in comparison. This type of account draws interest every quarter and does not account for high-yielding profits.
Accessibility The accessibility period of the owner is pre-fixed and cannot be altered before the completion of the same. The individual however gets a 7-day-period on completion of the maturation time and can have access to the money and the decision to re-deposit the money along with the profit or interest gained. The accessibility of the individual owning a saving account is determined by the holder of the account. They can also have access to the account and perform activities from various branches of the same bank (not necessarily the home branch) most of the time unless stated otherwise by the rules and regulations implied by the bank.
Period The period set for each CD is different from one another and also depends on the bank or institution from which it is being issued. There are short-term and long-term CDs and the interest rates and accessibility depend on factors associated with them. There is no time limit regulation on a savings account.
Penalty charges There are penalty charges involved with the withdrawal of the amount preterm. There are no penalty charges involved unless the bank or institution states a minimum amount of money that needs to be retained in the account and the individual fails to follow the directive.

What is a CD?

CD in terms of banking stands for Certificate of Deposit. It is a time-sourced financial operation that can be a safe future-oriented strategy plan to gain some extra money. It does not fluctuate in value based on the market price and hence provides the saver with the exact amount mentioned during the initiation of the process. However, the release of the deposit pre-term or mid-term may lead to penalization by the institution. This is known as ' lack of liquidity '. It is this lack of liquidity that holds most people from exploring the various opportunities that CDs provide. The fact that CDs are a lot less volatile when compared with other monetary strategies considered like investing in stocks or other forms of security funds is often unaddressed. One can hold multiple certificates of deposit at the same time at varying interest and maturity periods.

Types of CDs

There are different types of CDs. They differ from each other depending on their attributes which might not necessarily be shared among each other.

Let's compare and analyze the different kinds of Certificates of deposit:

Liquid CD

Liquidity is one major concern for any person depositing and maintaining their money in the form of a CD. Liquid CDs can prove beneficial up to a certain limit in such cases. In the case of liquid CDs, the person owning it can mention the number of times the money would need to be withdrawn and the period up to which they will maintain the deposit post which the CD deposit should be accessible without a penalty charged upon them. The liquid CD is a safer opportunity within the rubric as it involves a lesser risk of attracting a fine. However, liquid CDs would entrust a slightly lower level of interest when comparing it with other types of CDs. It would also include a moderately higher maintenance fee compared to other CDs in the category.

No penalty CD

A no-penalty CD gives the saver the complete freedom to withdraw the CD at any given point without having to pay a penalty. However, since the time frame is set for the deposit to be maintained, if the person wishes to release or withdraw the money pre-term, they must withdraw the entire amount. It is all or none. The person cannot withdraw a part of the money and maintain the rest. This can be used to maintain a fund that would need to be released in need of an exigency or sudden requirement. If one is looking forward to making profits from the CD, a no-penalty CD might not be the best option.

Traditional CD

Traditional CDs are the most common and highly preferred type of CD. However, this attracts a penalty if one does not abide by the maturity period. A traditional CD permits the individual to deposit any amount of money beyond the minimum limit for a chosen time generally known as the 'maturity' period. Upon completion of it, one can either release the deposit along with the interest added to it by the organization or place it as a deposit immediately after. Nevertheless, if the person decides to withdraw the deposited money before it reaches its maturity period, generally known as the 'pre-term', the consequence involved will be the attraction of a penalty.

Brokered CDs.
A brokered CD involves an account to be set up for the transaction. This might involve an initial fee. However, one major benefit of Brokered CDs is that with just one account being set up the individual can have easy access to attractive interest rates from multiple banks and organizations. Choosing brokered CDs can help an individual save themselves from the risk of penalty as the person can have their investment sold by the broker and receive the money without any charge of penalty. Although this might sound easy, it could also involve a loss of money including the initial deposit as the interests and profits are highly dependent on the market and its volatility. 

Callable CD

This is a type of brokerage CD. Callable CDs involve decisions that are generally under the bank or institution. They hold the power to continue with the CD or call it off on demand and reimburse the money to the saver. Either of the two choices is made primarily considering the interest rates. If the interest rates take an unexpected plunge, the institution discontinues the CD and provides the saver with the initial amount of deposit and the said interest. Though this seems like a safe option it limits the customer's profit gain from development depending on the interest rates that could follow. To draw more customers into choosing a callable CD, most institutions propose to provide a high-interest rate.

Bump-up CD

Bump-up CDs provide individuals to pursue a rise in the provision of interest in the case of a better option. For example, if you start a CD today and you have a fixed rate for it. 25 days later you are informed about the interest rates being higher on another type of CD. Bump-up CDs let you extend your CD up to which the higher interest rates are available. However, some organizations restrict the CDs to one advancement per period appointed for maturity. This kind of CD might eventually attract an interest rate slightly less than traditional CDs.

Flex CD

A flex CD is also known as a 'step-up or step-down CD'. It involved a stipulated amount of time up to which the individual gains the pre-set interest agreed upon by the customer and the organization. Upon maturation of the deposit and conclusion of the period, the interest rates would either increase or decrease.

What is a saving account?

A savings account is a basic service in terms of accounts that a bank has to offer with pre-determined fiscal policies. This type of account lets a person withdraw their money whenever necessary. However, cash would not be dispensed on the same day if too many transactions occur frequently. This is to prevent fraud and alert the individual of the same. Savings accounts have a maximum amount that can be withdrawn per transaction beyond which certain activities to confirm they are doing it themselves are to be done as per the directives of the bank. This can be easily noticed when performing online transactions with the savings account.

Types of Saving Account

Deposit savings account

A deposit savings account is what is in layman's terms referred to as a 'saving account' in general. A saving account gives the holder the capacity to access money using records to prove the status of the account such as their debit card or a cheque leaf from a checkbook. The individual will have to pay a moderate fee to generate the account. The interest rates provided for this type of account are also minimal in comparison to other options.

High-yield savings account

A high-yield savings account has a higher rate of interest rate associated with it. However, in terms of a high-yielding account, the individual cannot have in-person banking access, unlike a deposit savings account.

Joint saving account

A joint saving account's power is amalgamated between two or more people. To have access to the money or investments made through this account, the signatures, and each of their consent in the agreement of the withdrawal or any action related to the account.

Student saving account

Ideally, a student saving account is used for university-level students to have an account to help them steer through their financial necessities. These types of accounts are easily accessible to students attending universities or colleges by presenting documents of proof demanded by the institution. These accounts are generally linked to an educational loan if issued so that the student is provided the financial support on a specific date every semester/month depending on the schedule of fee payment by the organization they pursue their education.

Retirement account

Retirement accounts are mainly focused on the geriatric population. This type of account gives them the capability to save a certain amount of money after government budgetary requirements like tax and other commitments that need to be paid off.

Main Differences Between CD and Saving Account in Points

  • Liquidity is a major concern in terms of access to CDs, however, savings accounts offer a higher rate of liquidity permitting the individual to draw money when required.
  • Interest rates are higher for CDs than for saving accounts.
  • There is a pre-set maturation period determined for a CD, however, a saving account has no such timelines.
  • The penalty is levied upon any individual who releases the deposit pre-mature, unlike in the case of a savings account where no penalty is charged for withdrawing money.
  • Deposits of CDs cannot be easily accessed through access points like Automated Teller Machines, unlike those of saving accounts that can be accessed.
  • Even with a document like a cheque leaf, accessing a CD would be beyond limits, although a saving account can be accessed with it.


In short, CDs have higher interest provision capacity however, it involves a time bracket one must follow to access it without attracting a penalty. It is less flexible in terms of urgent withdrawal.

A saving account has higher flexibility in terms of access but involves an interest rate less than average. It also involves lesser risk and does not require the individual to constantly keep a tab.



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"Difference Between Certificate of Deposit and Saving Account." Diffzy.com, 2024. Wed. 28 Feb. 2024. <https://www.diffzy.com/article/difference-between-certificate-of-deposit-and-saving-249>.

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