Rates on savings accounts and CDs have been outstanding lately. In fact, even if rates start to fall, there are still very strong offers. You can find top-yielding savings accounts and CDs with APYs of 4% or even 5%.

However, the Fed’s interest rate cuts mean that the economic course has changed and the austerity party is over. It’s time to decide if there are any questions you want to ask for one last dance.

This means that by understanding the differences between CDs and savings accounts, you can decide which one is right for you.

CDs and savings accounts: It’s all about flexibility

The biggest difference between CDs and savings accounts is flexibility in terms of rates and accessibility.

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The money you put into a savings account is easily accessible, but savings APYs vary. You don’t lock your money but you also don’t lock it inside APY is also high. Withdrawing money is easy but the rate can and will change.

On the other hand, when you put money into a CD, you are committing to leaving it there until the CD matures. (With most CDs, you pay an early withdrawal penalty.) At the same time, the rate is fixed for the entire CD term. It is difficult to withdraw money, but the CD rate is fixed and will not change.

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How did high interest rates reverse conventional wisdom?

Common wisdom would say that CD rates are higher than rates on savings accounts. You’ll get a higher APY if you commit to longer CD terms. Banks were essentially rewarding their customers for tying up their money, and the longer the better.

But high interest rates turned everything upside down. High-yield savings accounts are currently paying the highest APYs. Not only that, but you can get better rates on shorter CDs than on longer CDs.

Because the Fed is expected to continue reducing interest rates, albeit gradually. As rates fall, banks will reduce savings APYs. However, they cannot change the rates they promise on existing CDs.

Banks don’t hesitate to pay high APYs for variable interest savings accounts. But they don’t want to have to pay, say, a 5% APY for a 5-year CD in a few years when rates drop significantly.

Which is better? CDs or savings accounts?

So are you choosing a savings account with the highest APY possible today? Or will you get the highest CD rate possible before rates drop even further? There’s certainly an argument for locking in high CD rates. It’s like holding out your last drink at the bar to make the party last a little longer.

Let’s say you invest $5,000 today in a 5-year CD with an APY of 3.9%. You can earn over $1,000 in interest during the CD term. In contrast, while you can earn over 5% on the best savings account right now, you won’t get that extra 1.1% interest for the entire five years. There’s a good chance the Fed will cut interest rates by as much as 2 percent in the next year or two. Therefore, you will almost certainly gain more interest from the CD.

While I’m always a fan of maximizing interest payments, there are other factors to consider. Most importantly, when might you need access to money? There’s no point in earning a few hundred extra dollars if you can’t withdraw your money when you need it.

Don’t be too distracted by falling rates. Generally speaking:

• Savings accounts are better when: You’re looking for a place to park money you may need to access quickly, such as your emergency savings.
• CDs are better when: You have money saved for a specific short- or medium-term goal, such as a holiday or a house deposit.
• Investment accounts are better when: You have money that you’re willing to risk a little more in exchange for higher potential rewards. Ideally, we’re talking about cash you won’t need for five to 10 years or more.

Key takeaway

When it comes to financial products, there is rarely anything better. Some products will be better suited to different situations and plans. CDs right now have a “last chance” feel to them. It’s true that these extraordinarily high rates won’t last forever. But it’s a bit like shopping during a sale. If it’s something you’ll use, it’s just a bargain.