I bonds vs high-yield savings vs CDs

Current rates side by side

The FDIC figures are national averages across insured banks and credit unions with available data, weighted by deposits, as of Oct 19, 2026. Top online banks often pay more than the national average, so compare the rate your own bank offers. The rate cap is the most a bank that is less than well capitalized may generally pay; it is a regulatory ceiling, not a rate you can get. I bond rates from U.S. Treasury Fiscal Data.

The I bond composite rate has two parts: the 0.90% fixed rate plus an inflation rate of 1.67% for six months, about 3.34% a year, based on the change in the consumer price index. A new rate is announced on November 1, 2026.

That composite rate is what the bond earns for its first six months only. After that it earns whatever rate is in effect, and the inflation part follows the consumer price index down as well as up. If inflation fell to zero, the bond would earn just its 0.90% fixed rate; in deflation the inflation part turns negative and can cancel some of the fixed rate, though the composite rate never drops below 0%. A savings account rate can also fall at any time, while a CD rate is the only one of the three that is set for the full term.

How each one works

I bonds

• Limit: $10,000 of electronic I bonds per person per calendar year, bought through TreasuryDirect. Gifts count toward the recipient's limit in the year they are delivered.
• Lockup: you cannot cash an I bond for 12 months. Cash it before 5 years and you lose the last 3 months of interest.
• Rate: the inflation part resets every 6 months from your issue date, so the rate can rise or fall. The fixed part never changes. Interest compounds twice a year, for up to 30 years.
• Tax: interest is subject to federal income tax but exempt from state and local income tax. You can defer the federal tax until you cash the bond, and it may be tax-free if used for qualified higher education costs and you meet the income limits.

High-yield savings accounts

Your money is available any time, but the rate is variable: banks can change it whenever they choose, and savings rates tend to move with the Federal Reserve's rate decisions. Interest is taxable by both the federal government and your state in the year it is paid. Use our savings calculator to see growth at your own rate.

CDs

A certificate of deposit pays a fixed rate for a set term, from a month to five years or more. If rates fall, your rate does not; if they rise, you are locked in. Withdrawing early usually costs a penalty of some months' interest, and on a short holding period that penalty can eat into principal. CD interest is taxable each year, even on multi-year CDs that pay at maturity.

Safety

I bonds are backed by the U.S. government. Savings accounts and CDs at FDIC-insured banks are insured up to $250,000 per depositor, per insured bank, for each account ownership category, such as single and joint accounts.

Worked example: $10,000 for 1 year and 5 years

Here is $10,000 in each option for someone in the 22% federal bracket with a 5% state income tax. The I bond assumes today's 4.26% composite rate holds for the whole period, which it will not exactly: it resets every six months. Savings and CDs use today's national averages, with savings assumed to stay at that rate.

Held 12 months. The I bond pays 9 months of interest after the early-redemption penalty.

Held 5 years. No I bond penalty at 5 years. Savings and CD interest is taxed each year as earned; I bond interest is taxed federally once, at redemption.

At today's rates, the I bond keeps the most after tax over both one year and five. Even after losing 3 months of interest, the I bond keeps $223 more than the average savings account over one year, and over five years it keeps $1,305 more than the average 5-year CD. Against a high-yield account the comparison is closer: to keep as much after tax as the I bond, a savings account would need to pay about 3.43% over one year (counting the I bond's penalty) or 4.68% over five, assuming both rates hold. Plug in the rates you can actually get.

Which fits which goal

• Emergency fund: a savings account, because you can reach it the same day and the balance never drops. I bonds cannot be touched for a year, and CD penalties apply exactly when emergencies happen.
• A purchase on a known date, 1 to 5 years out: a CD with a matching term locks in today's rate, and a ladder of CDs maturing in different years spreads out the timing. If the date might move, compare the penalty with the extra interest.
• Protection against inflation for money you can leave alone: I bonds, whose rate rises with inflation and whose fixed rate is kept for 30 years. The $10,000 yearly limit keeps them a supplement rather than a home for large sums.

Many people use more than one: a savings account for the first few months of expenses, CDs or I bonds for money they will not need for a year or more. A larger balance in one place earns no more insurance coverage, so balances over $250,000 in the same ownership category at one bank are worth spreading out.