Money market account vs. CD: How to choose
Money market accounts and certificates of deposit are both types of federally insured savings accounts that earn interest.
CDs generally offer the highest interest rates, but they also require you to set aside your savings for a specified period. Make a withdrawal and you get hit with a penalty. If you need more flexibility, pick a money market account.
When to open a money market account
- You want to earn some interest
- You want the ability to withdraw money on short notice, similar to the flexibility provided by a savings account. (Skip ahead for more info on savings accounts.)
- You’ve found a money market account that earns more than a comparable savings account
» To learn more about how MMAs work, read our primer on money market accounts.
» Ready to open an account? Here are NerdWallet’s picks for the best money market accounts
When to opt for a CD
- You won’t need to withdraw your money for a predetermined period, usually a few months or a few years
- You want to earn the maximum amount of interest without the risk associated with investing in stock or bond markets
- You can meet the minimum balance requirement. Many banks require at least $500 or $1,000 to open a CD
» For more about how CDs work, read our primer on CDs
» To find the best CD rates, see what banks are offering this month
When to consider a savings account
High-yield savings accounts, particularly those offered by online banks, generally have above-average interest rates. It makes sense to go with a savings account if you find one that offers better rates than a money market account and don’t want to tie up your cash in a CD.
And both money markets and CDs sometimes have higher minimum balance requirements than basic or high-yield savings accounts. A savings account can still give you a good return if you don’t have much to deposit.
|Type of account||Minimum deposit and access to cash|
|CD|| • $1 - $2,500
• Withdrawals during CD term typically mean a penalty
• Term lengths usually 3 months to 5 years
|MMA||• $1 - $5,000
• Maximum 6 monthly withdrawals, including checks, debit card swipes, electronic transfers
• May offer debit card, check-writing
|Savings account|| • $0 - $100
• Maximum 6 monthly withdrawals
• No debit card or check-writing
|Money market accounts||CDs||Savings accounts|
|Earnings||Variable return||Guaranteed return, comparatively higher interest rates||Variable return|
|Minimum deposit (varies by financial institution)||$1 - $5,000||$1 - $2,500||$0 - $100|
|Access to cash||
|Compare rates||Best money market rates||Best CD rates||Best savings rates|
Once you’ve decided whether to put your money in a CD, savings account or money market account, you’ll want to look for financial institutions that offer the best rates. Some banks and credit unions will let you open an account online, while others may require you to visit a branch or call, depending on the type of account.