Money Market vs. CD

Money market account vs. CD: How to choose

Money market accounts and certificates of deposit are types of federally insured savings accounts that earn interest. But their rates and ease of access differ.

• CDs generally offer higher rates and less access to your money. In fact, your money gets locked up for a set period of months or years. If you withdraw early, there is a penalty, such as a couple months of interest earned. (See more about CD basics.)

• Money market accounts generally offer more access and comparable rates to regular savings accounts. You can withdraw money six times a month. They generally have larger minimum balances and sometimes offer checks. MMAs differ from money market funds, which are a type of investment. (Learn more about how MMAs work.)

When to choose a money market account over a CD

• You want flexibility to withdraw money regularly. MMAs have the same withdrawal restrictions as regular savings accounts — six per month, not counting in-person or ATM withdrawals (some banks may charge a penalty for going beyond six).

• You’re looking for checking account-like perks. Some MMAs also 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 regular savings accounts.

» Ready to open an account? Here are NerdWallet’s picks for the best money market accounts

When to choose a CD over a money market account

• Your goal is a high rate. CDs tend to have the highest yields among bank accounts. They carry little risk as investments and none of the fluctuating value that stocks have.

• You don’t mind putting some funds out of your reach for months or years. A CD requires you to forgo any withdrawals until its term expires.

» Ready to dive in? See the best CD rates this month

When to choose a savings account instead

• 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.

• 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 bank products. Many high-yield savings options don't have monthly fees, but some may still require a certain balance to earn a top rate.

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