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Money Market vs. CD: What’s Better?
CDs have higher rates but offer less access to your money than MMAs.
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Margarette Burnette is a NerdWallet authority on savings, who has been writing about bank accounts since before the Great Recession. Her work has been featured in The Associated Press, USA Today and other major newspapers. Before joining NerdWallet, Margarette was a freelance journalist with bylines in magazines such as Good Housekeeping, Black Enterprise and Parenting. She is based near Atlanta, Georgia.
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Money market account vs. CD: The difference
Money market accounts (MMAs) and certificates of deposit (CDs) are types of federally insured savings accounts that earn interest. But their rates and ease of access differ.
CDs tend to have higher rates than money market accounts and give no access to your money until a term ends. Funds get locked up for a set period of months or years, and withdrawing early typically results in a penalty, such as several months to a year’s worth of interest. Most often, CD rates are fixed. (Learn more about CD basics.)
Money market accounts usually offer access to funds and rates comparable to regular savings accounts. Both allow you to withdraw money without penalty, and rates are subject to change over time. MMAs generally have larger minimum balances and sometimes offer checks. MMAs can also be called money market savings or money market deposit accounts, and they differ from money market funds, which are a type of investment.
How would you think about deciding between a CD and a money market account?
This is a highly individualized decision. I've found that a person's savings goal should determine which product they choose. Look at it this way: If you're setting money aside for unexpected emergencies and need that cash to be accessible, go with a money market account with a high rate. If you're saving up for a one-time purchase and don't want to dip into those funds for any other reason, a high-yield CD would be a great choice.
Tony Armstrong, Banking Lead Assigning Editor
I’d consider how comfortable I am locking away my money for a certain length of time. A CD locks away cash for the length of the term. That’s not always a bad thing. If you want to make sure you can’t touch the funds, you can put it in a CD and probably earn more interest than with an MMA. But if you can’t predict when you’ll need your money, and you also like the idea of accessing your cash with a debit card or check, an MMA could be better.
Margarette Burnette, Banking Senior Writer
When to choose a money market account over a CD
You want the option to add and withdraw money regularly. You can save money over time with an MMA. And MMAs have the same withdrawal restrictions as regular savings accounts: six per month, not counting in-person or ATM withdrawals. These restrictions vary by bank; some may not impose any limits, and some may charge a penalty for going beyond six.
You’re looking for checking account-like perks. Some MMAs offer debit cards, ATM access and check-writing abilities — features often reserved for checking accounts.
You prefer the balance of a solid rate plus easy access. Some MMAs stand out for a strong interest rate, though it's a good idea to compare with high-yield savings accounts.
4.20%SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi members with direct deposit are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
4.60%Annual Percentage Yield (APY) is accurate as of 111/19/2024. APY may change at any time before or after the account is opened. Available only online.
4.50%4.50% APY for $0 to <$250k; 4.80% APY for $250k+ balance
Min. balance for APY
$0
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
4.75%*Current promotional rate; annual percentage yield (variable) is 4.25% as of 11/8/24, plus a .50% boost available as a special offer with qualifying deposit. Terms apply; if the base APY increases or decreases, you’ll get the .50% boost on the updated rate. Cash Reserve is only available to clients of Betterment LLC, which is not a bank; cash transfers to program banks (www.betterment.com/cash-portfolio) conducted through clients’ brokerage accounts at Betterment Securities.
0.10%Advertised Annual Percentage Yield (APY) is variable and accurate as of 07/01/2024. Rates are subject to change at any time before or after account opening.
You want to lock in a rate. CDs tend to have the highest yields among bank accounts.
You want to minimize your risk. CDs are safe investments and carry none of the fluctuating value that stocks have.
You prefer to set aside a fixed amount of savings for a big purchase months or years away. A CD requires you to forgo any withdrawals or deposits until its term expires. This can be handy if you want a safe place to keep money designated for a big-ticket item such as a car or down payment.
You want a wider pool of high-yield options than MMAs tend to offer. High-yield savings accounts, particularly those offered by online banks, generally have above-average interest rates. They can be a better deal than many MMAs and still keep your money within your reach. Check out the best online savings accounts.
You don’t want to worry about the higher minimum balance requirements that MMAs and CDs can have. Savings accounts tend to have the lowest opening and ongoing balance requirements among the three banking products. Many high-yield savings options don't have monthly fees, but some may still require a certain balance to earn a top rate.
Frequently asked questions
How do rates differ for CDs and money market accounts?
CD rates are typically higher than money market account rates. (See the national average rates across deposit accounts.) Banks have an incentive to give you better rates for CDs because you promise to give up access to your money until the end of the CD term.
What’s the difference between a CD and a mutual fund?
CDs are time-sensitive savings accounts, while mutual funds are investment vehicles in which money gets invested in stocks, bonds or other assets. Learn more about mutual funds.
Which is safer: CDs or MMAs?
Both CDs and MMAs are federally insured savings accounts, so they’re equally safe. Up to at least $250,000 gets insured in your name across your individually owned accounts at one bank or credit union. (Learn more about federal deposit insurance.)
How do rates differ for CDs and money market accounts?
CD rates are typically higher than money market account rates. (See the
across deposit accounts.) Banks have an incentive to give you better rates for CDs because you promise to give up access to your money until the end of the CD term.
What’s the difference between a CD and a mutual fund?
CDs are time-sensitive savings accounts, while mutual funds are investment vehicles in which money gets invested in stocks, bonds or other assets. Learn
Both CDs and MMAs are federally insured savings accounts, so they’re equally safe. Up to at least $250,000 gets insured in your name across your individually owned accounts at one bank or credit union. (Learn more about
Your cash can go into many different bank accounts, and it’s helpful to know the pros and cons of account types. Check out these articles to help you choose the right account.
