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Should you put your money in a CD or Money Market Account? Here's how to decide.

July 20, 2017
Jennifer Dier
Jennifer Dier

Certificates of Deposit (CDs) and Money Market Accounts (MMAs) are savings accounts that generally offer higher interest rates than traditional bank savings accounts. But there are differences between them, and understanding these differences will help you choose the right kind of account for your unique financial situation.

Certificate of Deposit

A Certificate of Deposit is a “time” deposit account, meaning that you commit to leaving your money in the account for a term, or specific amount of time, typically in exchange for a higher interest rate. Term lengths for CDs often range from 7 days to 7 years, which makes them a good way to earn a favorable interest rate on funds that you don’t need regular access to. However, if you withdraw money from a CD before the maturity date or end of the term, you’ll have to pay an early withdrawal penalty fee. Bank CDs are insured by the Federal Deposit Insurance Corporation (FDIC), so they are a safe option for long-term savings.

Money Market Accounts

Money Market Accounts also provide a higher interest rate than a regular bank savings account, but in order to get that rate you may be required to open the account with a larger initial deposit, plus you’ll likely have to maintain a higher minimum balance. Many MMAs come with checks or debit cards, but they are not checking accounts. As with standard savings accounts, Federal regulations limit the number of withdrawals that can be made in a month. You should consider a MMA if you want the safety and security of a bank, a higher interest rate, occasional access to your money in a pinch, or prefer the convenience of writing checks.

CD vs MMA: what’s the difference?

As you can see, the main difference between CDs and MMAs is accessibility to your funds. When trying to decide which type of account to use, think about your savings goals. If you’re saving for a future purchase such as a home or a car, a CD is a good way to grow your funds faster because it offers better long-term earning potential. But, if you want to maximize the interest on funds that you might have to withdraw occasionally for emergencies, a money market account may make more sense.

Savings Account Options

We offer a variety of savings options, including regular savings accounts, CDs that feature a wide range of terms, and money market accounts that provide higher interest potential and easy access to your funds. Stop by and talk with one of our friendly and knowledgeable bankers to learn which option is the best one to help you achieve your savings goals.

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