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Saving money may not be very exciting, but like eating your fruits and vegetables, it’s a necessary part of life. There is a way you can make putting money into your savings a little more exciting: with an account that earns you money through interest.
Money market accounts and certificate of deposit accounts (CDs) can both earn you interest, but the way they work is a bit different. Let’s take a look at money market accounts versus CDs so you can make an informed decision on which is best for your goals.
Comparing Money Market Accounts vs. CDs
A money market account is an interest-bearing account similar to a savings account. Some accounts also have features of a checking account, such as check-writing abilities and debit card privileges. With a money market account, you’ll enjoy higher interest rates than a regular savings account.
A money market account is better for short-term rather than long-term savings. You’ll have easy access to your account with the ability to withdraw money, but there may be restrictions or fees on how much you may withdraw.
A certificate of deposit (CD) is another type of savings product, but this one is built for long-term savings because a certificate has a set maturity date. Although you can take out your money before the maturity date, you may be penalized for the transaction.
When you open a certificate account, you’ll deposit a minimum amount of money. In turn, you agree not to withdraw from the account until the maturity date, and you’ll receive extra money in return from a fixed interest rate.
Both money market accounts and CDs enable you to earn interest on the account balance, but with money market accounts, the interest rate fluctuates depending on the market. To open a money market or certificate of deposit account, you’ll need to deposit a minimum amount of money and then maintain a certain balance to avoid restrictions or fees.
How to Determine Which Account Is Right For You
When you’re considering a money market account versus a CD, do your research so you can choose the right financial institution and type of account to meet your needs. Some things to consider include:
1. Interest Rate Variability
With a CD, your interest rate is fixed, but money market accounts have variable rates. If you want interest rates to maintain stability as the market fluctuates, then a CD may be a good choice for you.
2. Easy Access to Your Money
If you want to easily access the money in your account, then a money market account may be the right choice. Although you may have transaction limits and fees for withdrawals with a money market account, it’s easier to withdraw money and may not come with as hefty of a penalty as withdrawing from a CD.
With some money market accounts, you’ll also have check-writing and debit card privileges, which makes accessing your money even easier. However, keep in mind that you’ll need to maintain a specific balance in your money market account.
3. Meeting Your Personal Goals
A money market account is best for short-term goals, while a CD is better for long-term savings goals in which you’re fine with depositing a large sum of money into the account and letting it grow over several years. For example, a money market account isn’t the best choice to save for retirement, but a CD can be a great way to diversify your investments. A CD can also be an excellent way to save for your child’s education fund or a future house.
Want to Boost Your Savings?
Kick your savings into high gear with money market accounts that reward large balances with higher dividends. Explore 7 17 Credit Union’s money market accounts today and see what higher dividends can do for your savings goals.
