A saver with spare cash faces a plain question. Do you take a rate that never moves, or one that follows prices? A certificate of deposit (CD) fixes its return for a term. A Series I savings bond ties part of its return to inflation and resets twice a year. Neither product works best in every season. Each trades one advantage for another, and cash locked in the wrong place can be hard to pull back.

Close-up of hands resting beside a folded envelope and a cup of tea on a worn wooden kitchen table in soft morning light.
Deciding where surplus cash should sit often starts with a quiet morning at the kitchen table.

How each product earns interest

An I bond has a two-part rate. The first part is a fixed rate set on the day of purchase. It stays with that bond for its full life, which can run up to 30 years. The second part is an inflation rate that resets every six months. It is based on the change in the Consumer Price Index for All Urban Consumers (CPI-U) over the two most recent six-month periods. A small interaction term is included in the composite calculation. Those mechanics are laid out in the U.S. Treasury Fiscal Data I bond rate dataset.

A CD works on different rules. The rate is locked for the whole term, whether that is six months, one year or five years. If fuel and grocery prices spike mid-year, the quoted yield on the CD stays put. That protects a saver when inflation cools and market rates drop. It adds no yield if price pressure returns. The saver knows the exact dollar amount that will arrive when the term ends.

I bond interest compounds semiannually. Every six months, the interest earned is added to the value of the bond. The next period's rate then applies to that larger balance. CD interest is another matter. A bank might credit it monthly, quarterly or at maturity. The sources reviewed here do not cover CD compounding, so the account disclosure from the issuing bank is the document that settles the math.

Reading the rate figures

Yield figures without dates mean very little. A commercial comparison page reported a composite I bond rate of 5.51% for bonds issued from November 2026 through April 2027. It described that as a 1.4% fixed rate plus a 2.04% semiannual inflation rate, which annualizes to 4.08%. The small interaction term accounts for the remaining gap. The same page listed top CD rates, checked on 28 October 2026, of 4.35% for six months, 4.60% for one year and 4.75% for five years. Treat those as one snapshot, not a standing quote. Most of these figures come from a single commercial page. Confirm the I bond numbers at TreasuryDirect and verify the CD numbers with the bank before acting.

On those headline numbers, the I bond composite sat about 116 basis points above the six-month CD, 91 above the one-year and 76 above the five-year. That gap says little about what comes next. The 5.51% rate holds only for the bond's first six months. After that, the inflation portion resets and can rise or fall with the index. The fixed portion stays the same for the bond's life.

Older bonds show how the tracking works. The same page gave a fixed rate of 0.9% for bonds bought between May and October 2026. Those bonds take the new inflation rate at their next reset, which works out to a 5.00% composite for the following six months. A CD gives a known yield from day one to maturity. An I bond gives an inflation link but no guaranteed forward rate. If inflation fades quickly, an I bond could trail a CD locked today. If prices climb again, the reverse could hold.

Access, penalties and taxes

Liquidity separates the two quickly. An I bond cannot be cashed during the first 12 months, except in narrow circumstances the source excerpt does not fully list. A holder who needs cash at month six has no way to reach it. Cashing out within five years of issue carries a three-month interest penalty, as both the Treasury dataset and the comparison page describe. The bond keeps earning interest until it is cashed or reaches 30 years.

The comparison page says a CD gives access to money within the first year. The cost depends on the bank. The sources do not describe CD early-withdrawal penalties. Those rules and fees sit inside each bank's deposit agreement. Read those terms before signing or moving funds.

Taxes differ as well. The comparison page summarizes them this way, and the summary is not confirmed against official IRS or TreasuryDirect guidance:

  • I bonds: federal tax can reportedly be deferred, and the interest is said to be exempt from state tax.
  • CDs: interest is fully taxable.

Reporting rules, election options and exceptions are not covered here. Check official IRS guidance or ask a tax professional before relying on these one-line summaries.

Questions to ask before locking cash

The comparison page offers a rough framework. It says a saver who wants a guaranteed forward rate, or who has more than $10,000 to place, leans toward a CD. It says someone who can leave money alone for a year or more may get a higher current yield from an I bond, along with its tax features. That is one commercial view, not an industry standard, and not personal advice. A few concrete questions help sort the choice:

  1. Is the rate fixed for the full term, or does it reset? An I bond resets its inflation part every six months. A CD stays constant.
  2. How long must the money stay put? An I bond enforces a 12-month lock. A CD allows earlier access under bank rules.
  3. What penalty applies on early withdrawal? An I bond charges three months of interest within five years. A CD penalty depends on bank policy.
  4. How is the interest taxed? Federal and state treatment reportedly differ between the two.
  5. Has the rate been verified at the source? I bond rates come from TreasuryDirect. CD rates come from the issuing bank.

What the numbers and sources leave out

Several gaps remain. The sources do not state annual I bond purchase limits. They do not explain deposit insurance limits for bank CDs. The FDIC page consulted, National Rates and Rate Caps, came through as navigation links and headers without the rate caps, so nothing concrete is drawn from it here. Check purchase caps and insurance coverage on official government sites before moving any money.

The inflation gauge has limits too. The CPI-U tracks broad price shifts across urban consumer baskets. One household's real spending on utilities, rent or groceries may move along a different curve. For an individual saver, the index is a rough guide.

Every figure here is a single point in time. CD rates shift with credit markets, and the I bond rate resets on a set calendar. A yield printed on a comparison site can go stale in days. Check the official rates directly before you commit.

Please seek a professional. This article is general information, not financial, tax or insurance advice. Please seek a licensed financial, tax or insurance professional about your own situation.