I got a certificate of deposit (CD) like a complete boomer just for kicks. No one really recommends these any more (and for good reason).
- US Bank is currently advertising 13-month CDs with a 4.7% APY.
- Wealthfront is offering a high-yield savings at 5% APY.
So why would anyone choose US Bank? The pro and the con is lock-in.
Is the Fed suddenly got spooked and decided to drop interest rates to 3%, the US Bank loans would lose money. Wealthfront’s rate would drop instantly.
But in real life, that kind of sharp drop is rare for the timeline we’re talking. If you’re just looking for a place to invest, don’t think about CDs. Get equity (in stock or bitcoin). If you’re looking for a place to store your short-term cash, then you want something liquid.
In that sense CDs are the worst of both worlds.
The reason I even tried it was because CDs had slightly edged out my high-yield account as a savings rate at the time (maybe like 0.3%). I did one for 6 months. But the amount was so marginal (again, this was for spare cash, not a proper investment) that it ended up not mattering in hindsight. Also, Wealthfront’s rate also went up during that time, while US Bank’s stayed the same.
Wealthfront also has a secondary benefit where if someone else signs up for a high-yield, then you both get a bumped rate by 0.5% for three months. That could be you.
TLDR: don’t do CDs. Do a high-yield savings account (which you won’t find at most banks).