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June 2, 2021
What we’ll cover:
If you come across CDs and money market accounts while exploring ways you could earn a little more interest for your cash savings, but aren’t sure which option could be a better fit, you can now strike “compare CDs vs. money market accounts” from your to-do list. We’ve done the legwork for you.
A certificate of deposit is a type of deposit account that typically offers a higher APY (annual percentage yield) than a traditional savings account. The catch is that you have to keep your money in the account for a fixed amount of time. Break the CD before your term is up, and in most cases, you could cough up an early withdrawal penalty.
We’ve got a brief rundown on CDs below, but if you’re looking for more in-depth material, check out our Guide to CDs. And if CDs are something that appeal to you, Marcus offers both high-yield certificates of deposit and a no-penalty certificate of deposit.
Here’s a quick rundown on what we found with many CDs:
There are two types of money markets you may have read about: money market accounts (offered by banks and credit unions) and money market funds (offered by brokerage firms). Similar names, different rules. We’re focusing on the bank account option – money market accounts.
Money market accounts offer APYs that are generally lower than ones you’d find with certificates of deposit, but money market accounts offer access typical CDs don’t: You can add money on a regular basis and may be able to withdraw funds with a debit card and/or checks along with digital transfers. Bank regulations limit these types of withdrawals, among others, to six total per month, but this limit may not apply to in-person withdrawals.
Here’s a quick rundown on what we found with many money market accounts:
Now that the basics of these types of accounts are out of the way, we can dig into what probably qualifies as an existential question in banking – why these accounts exist.
CDs and money market accounts could add oomph to your savings because they offer ways to get higher interest rates than you would with a traditional savings account along with FDIC insurance protection. But how you could use them to your advantage depends on what you need from the money you’re looking to deposit.
A fixed-rate certificate of deposit could help you save for a longer-term or time-bound goal, like a down payment on a house, because you can just leave the money in the account and wait until the CD matures to remove the cash.
If you’ve got money you may need at a moment’s notice but can generally leave it in the account, a money market account could be an option for those potential short-term goals. The relatively easy access could be helpful if you’re building something like an emergency fund or just want the ability to deposit funds on a regular basis.
Certificate of Deposit
Money Market Account
Certificate of Deposit
Money Market Account
Could be high, rate is fixed
Could be high, rate is variable
Can you add money to the account?
Not after the funding period
You can deposit funds on a regular basis.
Can you withdraw money from the account?
You'll typically pay a fee if you withdraw money before the term ends.
You can withdraw funds but some transactions are limited to a total of 6 per month.
Is the rate fixed?
Yes, you have a fixed interest rate for the CD term.
No, the rate is variable.
Typically the fees associated with CDs result from breaking the CD early.
If you exceed the withdrawal limit, or have less than the minimum balance, you may pay a fee.
To save money for long-term goals, like a down payment.
To save money and add to the balance, while keeping funds in easy reach(if needed, for say, an emergency).
If neither a money market account nor a CD seems to be the right match for your needs, you might want to consider a savings account instead. One advantage of savings accounts over money market accounts or CDs can be the liquidity. You can usually take your money out of a savings account without any penalties or additional fees, such an early withdrawal penalty. Of course, that convenience comes without the advantage of often higher interest rates of the other products.
A savings account might also be a good option for you if you’re concerned about the balance requirements of money market accounts and CDs. Savings accounts typically have the lowest opening and ongoing balance requirements of those three products.
This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation to buy or sell securities, or of an account type, securities transaction, or investment strategy. This article was prepared by and approved by Marcus by Goldman Sachs®, but is not a description of any of the products or services offered by and does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC are or any of their affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.
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