I have noticed that some banks offer short term CDs with interest rates that are actually lower than that that the same bank pays on a savings account.

For example Ally bank seems to offer a 0.30% APY for a 3 month CD (up to 0.39% if you deposit $25,000 or more) while their online savings account is offering a 1.05% APY.

What reasons would there be for purchasing such a CD instead of simply parking the money in a savings account?

  • Ally offers a loyalty/renewal bonus on CDs. So when I was building my CD ladder I opened very small 3 month CDs to secure the bonus when they renewed in to my 18 month CDs.
    – quid
    Commented Jun 14, 2017 at 16:52

1 Answer 1


Very little, as you expected.

The CD locks the rate in, meaning you get the rate for sure. The savings account can change any day, so it could fall below the CD's rate.
Chances are small, obviously, but it is theoretically possible. If you pay attention, if this happens, you could simply moving it to a CD then (if it is still offered).

People with little understanding that want 'security' might be suckered into buying a CD; or there could be versions offered where all the interest comes on the last day (so you delay taxes).

  • I suppose delaying taxes could occasionally be useful, but I imagine a situation where it actually saves money overall can't be that common (it seems that it would only be useful if someone needed a place to park money for the later part of a year, and would be paying a much higher taxes if he had the extra income in the current year).
    – lzam
    Commented Jun 15, 2017 at 2:35

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