Money Market vs. CD: What’s the Difference?

Money Market vs CD: Which Savings Option Fits You?

3 Key Takeaways:

• Money Market Accounts: Combine savings + checking, offer tiered interest, and allow immediate withdrawals — ideal for short-term goals with flexibility.
• Certificates of Deposit (CDs): Fixed interest for a set term, higher returns but penalties for early withdrawal — best for long-term savings.
• Decision Point: Money Market = liquidity and convenience; CDs = guaranteed growth over time.

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Money Market vs. CD: What’s the Difference? 

There are many types of savings accounts, and it’s important to understand which one will fit your specific savings goals. Two options are money market accounts (MMAs) and certificates of deposit (CDs). While both are federally insured at financial institutions that are members of a federal deposit insurance agency, let’s look at what sets these savings accounts apart.

Money Market Accounts 

What is it?
A money market account combines savings and checking features. Like a savings account, it pays interest, although the rate is typically a bit higher. As with a checking account, you can write checks on a money market account, although there may be a limit on the number of checks.

 

How does it work?
Money market accounts can be interest-bearing, meaning the money that’s deposited can grow over time with interest. MMA deposits are available for immediate withdrawal, providing financial flexibility for account holders.

 

Is it the right fit for me?
If you want to accelerate interest-earning through potentially higher-yielding rates and maintain liquidity, this type of savings account may be the right fit for you. 

Certificates of Deposit or CDs 

What is it?
This savings option is best if your funds can remain untouched for a longer period of time. A CD has a specific fixed term (from three months up to five years or longer), in which you can’t withdraw money without paying a penalty. The interest rate is fixed at the time of account opening.

 

How does it work?
A CD is a form of "time deposit.” You agree to make a deposit and keep your money in the bank for a pre-determined about of time. In return, you receive a higher interest rate from the bank. Typically, the rate you receive varies by the length of your term and designated balance tiers.

 

Is it the right fit for me?
If you’re looking to save securely and earn a set return on it, this type of savings account may be the right fit for you.