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Certificates vs. Traditional Savings Accounts

June 21, 2023 | Modified: June 28, 2023

When it comes to saving money, various options are available to individuals seeking to grow their funds while minimizing risk. Certificates (commonly referred to as CDs) and Traditional Savings Accounts are two popular choices. While both offer advantages and disadvantages, understanding the prime differences between these two financial tools is essential for making informed decisions about your savings strategy. We will compare the benefits, pros, and cons of each and highlight how Certificates can be a valuable tool in achieving your savings goals.

Traditional Savings Accounts – The Basics

Credit unions and banks offer Traditional Savings Accounts, allowing individuals to deposit their funds and earn interest over time. Here are some key advantages and disadvantages to consider:

Pros of Savings Accounts

  • Accessibility: Traditional Savings Accounts provide easy access to your funds. You can deposit and withdraw money as needed without any penalties or restrictions, making it a flexible choice for emergency funds or short-term savings goals.
  • Liquidity: Unlike some other investment options, Savings Accounts offer high liquidity. This means you can easily access your money without waiting for a maturity period.
  • Minimal Risk: Savings Accounts are generally insured by the government up to a certain amount. This guarantees the safety of your principal investment within the limit insured, providing peace of mind.

Cons of Savings Accounts

  • Low Interest Rates: One of the main drawbacks of Traditional Savings Accounts is the relatively low interest rates, usually offered.
  • Limited Growth Potential: The interest rates on Savings Accounts are typically lower than other investment options, such as Certificates. Consequently, the growth potential of your funds may be limited, making it challenging to achieve long-term financial goals.
  • Inflation Risk: The returns on Savings Accounts may not keep pace with inflation, resulting in diminished purchasing power over time.

Certificates – The Basics 

Certificates are timed share accounts offered by financial institutions, including Benchmark FCU; for a fixed period. This period typically ranges from a few months to several years. Here’s a closer look at the benefits and drawbacks of Certificates:

Pros of Certificates

  • Higher Interest Rates: Certificates generally offer higher interest rates than Traditional Savings Accounts. This is a big plus when comparing Certificates vs. Traditional Savings Accounts. By locking in your money for a specific period, you can enjoy a guaranteed return on your investment. A great example of this is Benchmark Federal Credit Union’s Certificate Flash Sale that is happening now. Benchmark’s Certificate promo offers a  4.50% APY* on 18-36 month*** Certificates. The offer is available to Benchmark FCU members** for a limited time only.
  • Fixed Returns: With Certificates, you know exactly how much interest you will earn over the specified term. This predictability can be advantageous when planning for specific financial goals, such as buying a house or funding education.
  • Disciplined Saving: Certificates can act as a valuable tool for disciplined saving. Since your money is invested for a predetermined period, you are less likely to be tempted to withdraw it prematurely. Locking into a Certificate can help prevent impulsive spending.

Cons of Certificates

  • Lack of Flexibility: Certificates have strict withdrawal rules, unlike Traditional Savings Accounts. If you withdraw funds before maturity, you may incur penalties and forfeit some of the interest earned.
  • Limited Access to Funds: Once you invest in a Certificate, your funds are tied up for the duration of the term. This lack of liquidity may not be suitable for those requiring immediate money access.
  • Inflation Risk: Certificates are vulnerable to inflation risk. Although they provide higher rates than Traditional Savings Accounts, your Certificate rate may not keep up with inflation.

Using Certificates to Achieve Your Savings Goals

While Certificates may have some limitations, they can be valuable for achieving specific savings goals. Here are a few ways they can help. If you have short-term savings goals, such as a vacation or down payment for a car, Certificates can offer a higher return than a Traditional Savings Account. By choosing a Certificate with a maturity date that aligns with your goal, you can save and earn interest simultaneously.

Certificates can also help when you are planning for significant financial milestones. Milestones like buying a home or funding a child’s education often requires a disciplined savings approach. Certificates provide a fixed and predictable return, ensuring your money grows steadily. Certificates also offer you diversity within your savings strategy. By investing in Certificates, you can balance liquidity, growth potential, and risk. Allocating some of your savings to Certificates can provide stability and a guaranteed return.

Certificates vs. Traditional Savings – A Recap

Both Traditional Savings Accounts and Certificates offer distinct advantages and disadvantages.

Traditional Savings Accounts provide flexibility and accessibility but may have lower interest rates. On the contrary, Certificates offer higher interest rates and disciplined saving but lack liquidity and flexibility. When considering your savings goals, assessing your timeline for saving, risk tolerance, and liquidity needs is essential to determine the most suitable option.

While Traditional Savings Accounts are appropriate for short-term needs and easy access to funds, Certificates can play a pivotal role in achieving long-term savings goals by providing higher returns and a disciplined savings approach. By carefully considering the pros and cons of each option and aligning them with your financial objectives, you can make informed decisions to optimize your savings strategy.

If you are interested in taking advantage of the Benchmark FCU Certificate Flash Sale and are not a member of Benchmark FCU, tap to learn about eligibility to join.

Learn more about Certificates in our blog “Balancing Risk and Reward: Incorporating Certificates into Your Portfolio.”



*APY = Annual Percentage Yield.  Yield is subject to change at Credit Union’s discretion without prior notice.  Early withdrawal penalties may apply.

**If not already a member, must become a Benchmark FCU Member by opening an Ultimate Membership Account to receive special Certificate rates.

***Available terms are 18, 24, 30, & 36 months.



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