Savers have tons of options for parking their cash. But choosing among a savings account, money market account and short-term certificate of deposit such as a 3-month CD can be confusing.

Here are some of the considerations.

The best savings option for you

Historically, the best 3-month CD rates handily beat the yields offered on liquid accounts. CDs give savers a little bit of a yield boost over savings accounts in exchange for a long-term deposit. The longer savers agree to leave their money in the bank, the higher the yield.

“Money market and high-yield savings accounts typically offer higher interest rates than standard savings accounts, but normally require higher balances and may have restrictions or conditions to accessing one’s money,” says Robert Drury, executive director of the Association of Christian Financial Advisors.

“CDs normally offer higher interest than these but unconditionally obligate one’s money for a specified term,” he says.

To get out of the CD early, savers typically incur a penalty fee. CD early withdrawal fees are usually stated as a percentage of the amount withdrawn or a number of days of interest. In Bankrate’s 2014 survey of CD penalty fees, 90% of banks were happy to dip into principal if accrued interest failed to cover the fee.

In order to combat savers’ reluctance to lock up money due to interest rate concerns, some banks offer alternatives to traditional CDs, including:

  • Bump-up CDs, which offer a rate increase in case the Federal Reserve raises rates.
  • Liquid CDs, which allow some penalty-free withdrawals.

Though these options do give savers more freedom, the best 3-month CD rates are usually found in the form of a traditional CD.

Compare banks for the best CD rates

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