A High-Yield CD or a Bank Bonus: Which is Better for Your Savings Goals?

If you’re lucky enough to have savings in 2024, you may be faced with the challenge of where to store them. Unless you’re putting it in a brokerage account, you’ll probably want to look for a high-interest bank account, such as a certificate of deposit (CD). And while CD interest rates are good right now, another option, a checking or savings account with a bank bonus, may offer better returns in the short term.

Well, there are some points to be careful about when it comes to bank bonuses. For example, you may be better off choosing a CD, setting up an account that has monthly fees. But if you’re not sure where to invest your money, consider when to open a CD and when opening a new bank account could bring you more income.

Bank bonuses can provide higher short-term profits

Bank bonuses are issued when you open a new account with a bank and meet certain requirements. For example, if he opens a savings account by April 1st and makes a new deposit of $25,000 within 30 days, he can earn $525 at Wells Fargo. This money must remain in your account for 90 days to receive the bonus.

Earning a $525 bonus on a $25,000 investment over three months is a significant return on your savings account. The annual interest rate on this $525 bonus is 8.66% on $25,000. On average, that works out to be about $175 per month.

No CD’s current interest rate is 8.66%. In fact, many of the best CDs have odds of less than 5.50%. For example, Raisin’s 3-month Ponce Bank High Yield CD has an APR of 5.25%. If you deposit $25,000 into this CD, you’ll earn an average of $107 per month, for a total of about $322. In this case, bank bonuses offer even more benefits.

Of course, earning bonuses on savings and checking accounts doesn’t directly compare to CDs. First, the CD earns interest during the term and then completes or extends the term at different interest rates. However, savings and checking accounts remain open indefinitely and will not be closed unless you instruct us to do so. Additionally, some charge monthly service fees, which can affect returns. For example, the Wells Fargo Way2Save Savings Account has a monthly maintenance fee of $5. This can be waived, but still needs to be considered.

Overall, the issue of bank bonuses and CDs is particularly relevant to those who are already looking for a new checking or savings account. In this case, receiving a bank bonus on your savings could give you a higher return than a CD would provide. However, CDs have some unique advantages that you should also consider before making your decision.

CDs can offer long-term returns

Bank bonuses give you higher returns overall. However, the payment is one-time only and cannot be extended or renewed. Additionally, if your bank suspects that you are canceling, or earning benefits, they may not accept your application for a new account and may later close your account.

If you have long-term goals, a CD may be a better fit for your goals. These accounts have a fixed interest rate that lasts for the duration of the CD. For example, you can get a 12-month Bread Savings CD at 5.25% per annum. You can also receive her 5.30% APR on the second year of your CD if you set up auto-renewal. For a $25,000 deposit, the first year she would earn $1,312.50 and the second year she would earn $1,394.56.

Of course both are possible. For example, Chase is currently offering a $300 bank bonus when you open a new Chase Total Checking® account and receive at least $500 in direct deposits within the first 90 days (reward expires April 17, 2024). This bonus does not require a large deposit. Must have sufficient direct deposits to qualify. This allows you to store your savings in a CD and earn a fixed annual interest rate.

So if your bank gives you a bonus for keeping your savings in a new account for a certain period of time, say three months, you could potentially earn more than if you opened a CD over the same period of time. But if you don’t plan on opening a new bank account or want to freeze your current high interest rate for an extended period of time, there’s no need to worry. You can make good money using CDs. Be sure to check out the best CD rates currently available, compare them to your bank’s bonuses, and find out which plan is the best value for your savings.