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Money Market vs. CD: What’s Better?

a woman reviews options for personal loans and personal lines of credit on her laptop.

Money Market accounts and Certificates of Deposit (CD) are two popular savings options that allow you to earn interest on your money. There are some important differences in how the two accounts work, however, that may make one a better option than the other for your needs and goals.

How Do Money Market Accounts Work?

Money market accounts are similar to savings accounts in how they work, except they usually pay more in interest. The interest rates for these accounts are usually variable.

When you deposit money in a money market account, there will be limits placed on how often you can make withdrawals. Many financial institutions limit monthly withdrawals from these accounts to six per month, although some may allow more.

Withdrawing money from a money market account is usually very easy. Most banks and credit unions issue debit cards that can be used to make purchases. You may also have the option of writing checks from the account.

How Do Certificates of Deposit Work?

With a Certificate of Deposit (CD), you deposit money for a fixed term with a fixed interest rate. You can select from different terms, from three months to five years. Longer terms usually pay more in interest than shorter terms.

With a CD, you will not be able to make withdrawals anytime you like. In exchange for earning a higher interest rate than other interest-bearing accounts, your money stays locked up until the term ends. When the term is over, you can either withdraw your money and the interest earned or roll it over into a new CD.

Although it is possible to withdraw money before the term ends, you may be assessed a penalty for doing so.

When Should You Choose a Money Market Account?

Money market accounts are best suited for those who think they may need to periodically access their money. Because they usually earn more in interest than savings accounts, money market accounts are ideal for when you need to save for something, like a down payment on a home or something else.

Money market accounts are also great for emergency funds. Your account can grow through the compounding of interest, plus you can also access your money if you need to pay for a vehicle repair, an unexpected medical bill, or something else.

When Should You Choose a Certificate of Deposit?

A CD may be a good option when you have a separate emergency fund and you believe you won’t need to access the money until the term ends. It’s ideal for long-term savings. Because CDs impose an early withdrawal penalty, it encourages you to keep your money invested.

Money Market vs. CD FAQ

If you are undecided as to whether a money market account or CD is the best option for your needs, the following are some frequently asked questions that may be helpful.

Could I Lose Money in a Money Market Account?

The money you deposit in a money market account is fully insured for up to $250,000. If your account is with Jeanne D’Arc Credit Union, your deposit is insured by the National Credit Union Administration (NCUA) for $250,000. Deposits over $250,000 are insured by the Massachusetts Share Insurance Corporation (MSIC).


What Does It Mean to Ladder CDs?

A CD ladder is when you have multiple CDs with different terms. Some will have short terms, while others will be longer. This allows you to take advantage of higher interest rates on CDs with longer terms. Although you will earn less in interest on the shorter CDs, your money will not be locked up long-term in case you need to use it for something.

Are CDs Safer Than Money Market Accounts?

CDs and money market accounts are both considered to be equally safe. When you deposit money in either account, your deposit is insured by NCUA for up to $250,000, with additional funds insured by the MSIC.

Can I Have Both a Money Market Account and CD?

You can have both a money market account and a CD at the same time. It’s also possible to have multiple money market accounts or CDs. As previously discussed, some people have multiple CDs to take advantage of different interest rates.

Do I Have to Wait a Certain Period to Close a Money Market Account?

You can close a money market account anytime you like. However, depending on your financial institution, you may be assessed an account closure fee if your account hasn’t been open for very long.

What Is the Grace Period of a CD?

A CD’s grace period refers to the time immediately after the maturity date in which you can renew the CD for another term. You can also add to the amount deposited or withdraw money during this time without being assessed a penalty.

Do Money Market Accounts or CDs Require Minimum Balances?

Many financial institutions do have minimum balance requirements for their money market accounts and CDs. The specific amount will vary.

Is a Credit Check Needed for a CD or Money Market Account?

Because CDs and Money Market Accounts do not involve the lending of money, a credit check is not required. As long as you meet the minimum balance requirement, you can deposit money in either type of account and earn interest.

How Are Money Market Accounts Different From Savings Accounts?

Money Market Accounts usually earn more in interest than savings accounts. With a savings account, you also may not be able to write checks from the account. When you need to access your funds, money can be transferred to a checking account or you can withdraw cash.

Where Can You Open a Money Market Account or CD?

Money market accounts and CDs are very easy to set up. You can open an account at your local bank or credit union.

Jeanne D’Arc Credit Union, for example, offers money market accounts and CDs with competitive interest rates and no hidden fees. All deposits are insured by the National Credit Union Administration (NCUA) for up to $250,000. Deposits exceeding $250,000 are insured by the Massachusetts Share Insurance Corporation (MSIC).

Click on the following link to learn more about our Money Market Accounts and CDs.

See our Money Market & Certificates of Deposit options & benefits