When it comes to saving money, certificates of deposit have quite a few advantages. In addition to getting a high interest rate, you’re also ensuring that your money is safe—from shifting interest rates, from loss and even from impulse spending.
Of course, as you probably know, a CD is not the only way to save money. Plenty of alternatives exist, and the more you know about them the better able you’ll be to determine whether a CD is the best option for your saving needs.
Here are some alternatives to certificate of deposit accounts
Traditional Savings Accounts
Practically everyone starts their financial life with a savings account. It’s no secret why. In addition to being able to open one with as little as $5, as you can at First Alliance, you can also deposit money in your savings account whenever you like and withdraw it at any time. You’ll also get interest on the funds you keep in your account.
Having said that, the interest rate on a traditional savings account shifts is much less than you’ll get from the money you keep in a certificate of deposit. You’ll also have to deal with the fact that the interest you get will change as the fed raises and lowers its own interest rates.
Open a First Alliance savings account today
Money Market Accounts
A money market account offers the best features of a CD and a traditional savings account. If you open one, you’ll be getting an interest rate comparable to short-term CDs. You’ll also enjoy the same access to your money that you get with a traditional savings account.
On the other hand, a money market account also has a much higher minimum deposit requirement than either a traditional savings account or a CD. At First Alliance Credit Union, for instance, you need to have $2,000 to open up a money market account.
Club Savings Accounts
If you’re looking to save for a financial goal, a club savings account is for you. This type of savings account helps you put away money for a big event by keeping your money in this account and only transferring it to your checking account on a specific date. At First Alliance, these dates are:
- June 1st, so you can use your money for a summer vacation
- August 1st, so you can use the money for back-to-school supplies
- November 1st, so you can use the money for holiday shopping
A club savings account also has a higher interest rate than a traditional savings account.
Having said that, CDs usually have a higher interest rate than club savings accounts. Depending on the date of the event for which you’re saving, you may also be able to use a CD strategy, especially the bullet strategy, to create multiple CDs that mature around the same time.
Got questions about different ways to save? Ask us!
Get the Best Savings Solution at First Alliance Credit Union
A certificate of deposit has a lot of advantages for saving money, but it’s not your only option. Several alternatives exist to short term CDs and long term CDs, such as a traditional savings account, a money market account or a club account. Each of these has different features you may want to consider for your own savings.
If you’d like to take advantage of any of these types of accounts, become a First Alliance Credit Union member today. Our member advisors will be happy to sit with you and help you figure out which type of account works best for you. You’ll also be able to track your savings progress by using our online banking platform and mobile app.
