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Why banks pay lower interest rates on savings accounts than on certificates of deposits.

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Answer:

See below

Step-by-step explanation:

Savings accounts are more common than certificates of deposits. Banks do not restrict customers on the number of withdrawal and deposits per period in a savings account. Banks consider savings account very liquid because a customer can withdraw their money anytime. Due to this reason, savings accounts attract low-interest rates.

Certificate of deposits, CDs have withdrawal restrictions. In this type of account, the customers agree to keep their money in the bank for a specified period. Banks offer a higher interest rate to encourage customers to keep their money in the account for the agreed duration.

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