Final answer:
The main drawback of a CD compared to a savings account is liquidity, due to penalties for early withdrawal. Savings accounts offer more flexibility and are protected by the FDIC, but have lower interest rates.
Step-by-step explanation:
The main drawback of a certificate of deposit (CD) over a savings account is liquidity. CDs require you to commit your money for a fixed term, and although they may offer higher interest rates, there is usually a substantial penalty for early withdrawal. In contrast, savings accounts typically provide more flexibility, allowing for easy access to funds without penalties, albeit at lower interest rates.
Bank accounts offer advantages such as safety due to protections from the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000, as well as high liquidity. However, the safety and easy access of a savings account come with the trade-off of lower interest rates compared to other investment vehicles like CDs.