Which Is Better : Money Market Account Or Certificate Of Deposit?

Investors and regular consumers looking for low interest savings options are continually looking for vehicles in which they can utilize as a part of their investment portfolio, while understanding that the yield is low but the risk is low as well. Banks typically two types of savings vehicles geared for investors, a money market account and a certificate of deposit (CD) account. While both types of accounts offer a low rate of return, both typically offer higher returns for a higher account balance, but that is generally where the comparison ends. If investors are looking to put their money in a place where they can see their money slightly grow without touching it, then a CD is the way to go. If investors want the option of limited withdrawal transaction options while earning a lower interest, then a money market account is definitely the option for them. 

A certificate of deposit is the type of account where an investor is actually making a deposit to lend the bank a sum of money for a period of time. The CD then pays the investor a set interest rate upon maturity of the CD, which can range from 30 days all the way up to several years. The interest rate on a CD is higher the longer the investor has his money tied up in the CD. The drawback is that with a CD, the money cannot be accessed at all, so if it is a longer term maturity CD, the investor is unable to draw from it at all. The interest yield is higher than a money market account, but can’t be touched. With a money market account, the investor is depositing a minimum set sum of money, and earns a little more interest with a higher averaged account balance. Money markets can be accessed by the investor, usually up to six times per month with no penalty incurred. Therefore, their money is always available to them with money market accounts.

If an investor isn’t worried about getting to his money quickly, a CD can definitely be a great low yield investment. However, in terms of wanting a more fluid low interest option, a money market account is definitely the better option. In days when economic struggles can make the face of any investor cringe, money markets certainly provide a safer alternative for a guaranteed low interest yield and access to quick funds when needed.