CD vs Cash in Checking (2026), The Cost of Not Earning Interest
| Account | Yield | Source, as of |
|---|---|---|
| Interest checking, national average | 0.07% | FDIC national rates, 9/21/2026 |
| Savings, national average | 0.37% | FDIC national rates, 9/21/2026 |
| Leading online high-yield savings | 3.00-4.00% APY | Bank sites (Sallie Mae 3.85%, Marcus 3.50%, Ally 3.00%), 9/24/2026 |
| Treasury / government money market funds (7-day) | 3.45-3.76% | Fund sites (SPAXX, SWVXX, VUSXX), 9/23/2026 |
| Top nationally available 1-year CDs | 4.35-4.50% APY | DepositAccounts, updated 9/25/2026 |
| Top nationally available 5-year CDs | 4.35-4.50% APY | DepositAccounts, updated 9/25/2026 |
Rates move often; check the bank's own page before you open anything.
This isn't really a CD comparison; it's an opportunity-cost calculation. Most Americans have far too much cash sitting in low-yielding checking accounts because they conflate "in the bank" with "safe" and "in a CD or money market" with "tied up."
Both are FDIC-insured. Both are dollar-denominated. The only difference is liquidity: checking is immediately accessible, CD has a maturity. For amounts beyond your monthly cash needs (typically $5-15K depending on lifestyle), keeping money in checking costs you roughly 4.4% per year in foregone yield at September 2026 rates. On $50K, that's about $2,215. On $250K, about $11,075.
The fix isn't dramatic. Keep your normal float in checking, move the excess to a high-yield savings account or short CD. Build a 1-2-3-4-5 year CD ladder for the longer-horizon cash. The whole exercise takes one afternoon and recovers thousands of dollars annually.
Rates expire like milk.
The best MYGA, CD and savings rates change every few weeks. Get a short email when a rate on this page changes.
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CD vs MYGA, after tax
What $100,000 earns in 5 years: CD vs MYGA, after tax
Rates used: CD 5.00%, the top nationally available 5-year CD (Bankrate, October 14, 2026); change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| CD, interest taxed every year | $121,081 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the CD, after tax | $5,055 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. Bank and credit union deposits are FDIC or NCUA insured up to the limits; a MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
Side-by-side comparison
| Dimension | CD | Checking Account |
|---|---|---|
| Yield (September 25, 2026) | 4.35-4.50% locked (top 1-yr and 5-yr CDs, DepositAccounts) | 0.07% (FDIC national average, 9/21/2026); SoFi checking 0.50% (9/23/2026) |
| Yield differential | n/a | ~4.4% gap per $1 of idle cash |
| Liquidity | Penalty for early withdrawal | Instant: debit card, checks, transfers |
| FDIC insurance | Yes, $250K per depositor per bank | Yes, $250K per depositor per bank |
| Best for | Money you won't touch for 6+ months | Monthly cash flow, bill pay, emergency buffer |
| Federal tax | Annual on interest | Annual on interest (tiny amount) |
| State tax | Annual on interest | Annual on interest |
| Annual cost of $50K idle in checking | n/a | ~$2,215/yr opportunity cost |
| Annual cost of $250K idle in checking | n/a | ~$11,075/yr opportunity cost |
| Setup effort | 10 minutes online or in-branch | Already done |
| Best for | Excess cash beyond monthly needs | Monthly float of 1-2 months expenses |
When CDs win
- You have more than 2 months of expenses sitting in checking. Anything beyond is opportunity cost. Move the excess.
- You haven't checked your savings/checking yields in 2+ years. Rates have changed massively. The national average savings account paid 0.37% on September 21, 2026 (FDIC), while leading online HYSAs paid 3.00-4.00%.
- You're planning a known future expense (car, tax bill, college) 6+ months out. Lock a CD that matures around the expense date.
- You have $25K+ idle. The dollar value of the yield differential becomes meaningful and worth the small effort.
- You have a tendency to overspend with easy-access cash. A CD creates a small friction that helps with savings discipline.
When Checking Account wins
- You need monthly cash flow access (bills, mortgage, groceries). Keep 1-2 months in checking. This is non-negotiable.
- You're between investment decisions and the cash will move within 30 days. The short term doesn't justify the friction.
- Your checking account has a high-yield tier (some Reward Checking products pay far above the 0.07% average, with conditions). Compare to CDs. Sometimes Reward Checking wins.
- You'll incur ATM/overdraft fees if you can't access cash easily. The fees can exceed CD yield.
- You have a very small balance under $5K. The setup friction isn't worth the few hundred dollars annually.
Worked example: $250,000 over the planning horizon
You're 55, household income $180K, married. Your checking account has $85,000 sitting in it because you "like having a buffer." You spend roughly $9,000/month. Two strategies:
Option A: Keep $85K in checking at 0.07% APY.
Annual interest: $59.50 at the 0.07% FDIC national average (September 21, 2026). After 24% federal + 5% state: $42.25 net.
Option B: Tiered structure.
Checking: $15K (1.7 months of expenses). Online HYSA: $20K at 3.85% (Sallie Mae, 9/24/2026) = $770/yr. 1-year CD: $25K at 4.50% (HAB Bank, 9/25/2026) = $1,125/yr. 5-year CD: $25K at 4.50% (Bread Savings, 9/25/2026) = $1,125/yr. Checking $15K at 0.07% = $10.50/yr. Total interest: about $3,030/yr gross / $2,152 net.
Option B earns about $2,110/year more (after tax) than Option A with no meaningful loss of liquidity (you have $15K checking + $20K HYSA = $35K accessible within 1-2 business days). The 5-year CD is your "won't touch" tier. The 1-year CD bridges if you need more in 12 months. The fix takes 90 minutes online.
Over 10 years at the same rates: about $21,100 of additional after-tax interest by structuring the cash properly. Over 30 years, more than $63,000 before counting compounding. All by doing nothing different except moving the cash.
Tax implications
Both checking and CDs are taxed identically: ordinary income annually, federal and state. The tax treatment isn't the issue. The missing yield is.
For high-state-tax residents, the more tax-efficient alternative to a CD is a Treasury bill or Treasury money market fund (state-tax exempt). On $85K, the state-tax savings is non-trivial in CA (~$200/year). Worth considering as part of the tier structure.
Frequently Asked Questions
Related independent reviews
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- CD vs Money Market Fund
- Annuity Reviews for Larger Sums
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Disclosure
This comparison reflects publicly available product information and approximate market yields as of the date stated above. CD, Treasury, bond, annuity, and money market rates change frequently, typically weekly for short-term instruments and monthly for annuities and bonds. Always confirm current values against the most recent issuer disclosure document, FDIC/NCUA insurance status, and the actual contract before purchasing. This is general education, not a personal recommendation or an offer of any product. Tax treatment described reflects U.S. federal and state law as of 2026 and is subject to change; consult a qualified tax professional. Hans Goldstein is an independent licensed insurance producer (NPN 20602398, CA Life License #4273294) appointed with multiple A-rated carriers; he does not sell CDs, Treasuries, mutual funds, or securities. No compensation has been received from any carrier or institution in connection with the publication of this comparison. FDIC insurance covers deposits up to $250,000 per depositor, per insured bank, per ownership category. State insurance guaranty fund coverage on annuities varies by state and is typically $250,000-$300,000 per owner per carrier. Past performance does not predict future returns.