Two major negatives of a certificate of deposit (CD) are limited liquidity due to early withdrawal penalties and the risk of low returns that may not keep pace with inflation. Funds are locked for a specific term, making them unsuitable for emergencies, while fixed rates mean missing out if market rates rise.
The primary downside of CDs is that your money is tied up in the investment. However, that can be a benefit for some savers who worry that they will be tempted to withdraw from their savings. The fixed term of a CD and the penalty for early withdrawal provide a deterrent to spending.
You generally won't find 7% on standard savings accounts, but can find it on Regular Saver Accounts (like First Direct or Co-operative Bank in the UK) or with specific Credit Unions (like Community Financial Credit Union in Michigan for up to $1,000 balance). For kids, some accounts like WECU offer 7% on small balances, while some high-yield checking accounts or accounts in other countries (like India's IDFC Bank) might hit 7% with strict conditions or large deposits.
A savings account is easier to access for immediate needs and offers variable interest rates that can change over time. CDs can be more difficult to access but earn interest at a locked-in rate that can be higher than a savings account.
Though the yields tied to CDs are often more favorable than they are for more liquid bank accounts, they're lower than what you'll get for higher-risk investments such as stocks and exchange traded funds (ETFs). As such, CDs aren't great for long-term savings, such as retirement.
Yes, you pay taxes on CD interest every year it's earned, even before the CD matures and you can access the money. CDs are taxable income reported on Form 1099-INT if you earn $10 or more in interest annually. Early withdrawal penalties can be deducted from your taxes, potentially reducing what you owe.
CDs are never a good idea for your investments.
But even those rates are barely enough to keep up with inflation, which makes things more expensive over time (no wonder Dave Ramsey likes to call CDs “certificates of depreciation”). That's not a winning strategy for long-term investing, people!
CDs are generally safe during market crashes or recessions because they're not tied to the stock market and benefit from federal insurance in the event that your bank or credit union fails. Certificates of deposit (CDs) are generally considered safe, even in the event of a market crash or recession.
Disadvantages of CDs. Small and portable. Fairly fragile, easy to snap or scratch. Very cheap to produce. Smaller storage capacity than a hard drive or DVD.
CDs are among the safest investments you can make, with both your principal and earnings fully insured by the federal government. This allows your money to earn higher interest than on other types of deposit accounts, but with almost zero risk of losing your money.
Many personal finance experts recommend saving at least three to six months' worth of expenses. But the goal amount can vary on several personal factors. An emergency fund is just as the name suggests. This is money set aside to cover your necessities if you suddenly lose your job.
You're unlikely to find an everyday savings account with 8% interest in the US as of early 2026 (rates are closer to 4-5%), but you might find such high rates for Fixed Deposits (FDs) or special accounts, especially in India (like Jana SFB, Suryoday SF Bank, or DCB Bank for FDs) or for specific UK accounts (like Principality BS), often for senior citizens or specific tenures, so check banks like Unity Small Finance Bank, Jana Small Finance Bank, or Suryoday Small Finance Bank, but always verify rates for your location and account type (savings vs. FD).
Yes, interest earned from savings accounts, including high-yield accounts, money market accounts, and CDs, is considered taxable income by the IRS and must be reported on your federal tax return, taxed at your ordinary income rate (10% to 37%). Banks send Form 1099-INT for interest over $10, but you must report all interest, even if you don't receive the form. The principal isn't taxed, only the earnings, and sign-up bonuses are also taxable.
CDs replaced cassettes starting in 1991. By the late 2010s, CDs were on their way out, replaced by streaming music and digital downloads.
On this day 41 years ago, March 2, 1983, Compact Disc players were first made available for sale in the United States along with compact discs (16 titles from CBS Records). Despite costing up to $1000, over 400,000 CD players were sold in the United States between 1983 and 1984.
As the CDs began arriving, the feelings returned—there is nothing like owning your favourite music; no internet needed, no ads and no two-dimensional sound—CD sound is uncompressed, high-quality audio (16-bit 44.1 kHz), and they provide a much clearer and richer sound than most streaming platforms.