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Money Market Accounts vs. CDs: Understanding the Differences

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What we’ll cover:

  • Typically, CDs and money market accounts both offer higher APYs than what you’d get with a traditional savings account, but come with different benefits and rules 
  • With CDs, you generally need to leave your money in the account for a fixed period of time
  • Money market accounts allow you to add and withdraw funds

If you come across CDs and money market accounts while exploring ways you could earn a little more interest for you cash savings, but aren’t sure which option could be a better fit, we have news: you can strike “compare CDs vs. money market accounts” from your to-do list. We’ve done the legwork for you.  

What’s a CD?

A certificate of deposit is a type of account that typically offers a higher APY 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 a 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:

  • Benefits: Typically comes with a fixed rate at a higher APY compared to traditional savings accounts
  • Minimum balance: Commonly ranging from $500 to $25,000
  • Can you add money? Usually there’s a funding window and then the balance is locked
  • Withdrawals allowed? In most cases, exit early, pay a penalty 

What’s a Money Market Account?

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 ones offered by banks – 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:

  • Benefits: A higher APY than what you’d get with a traditional savings account (but typically not as high as the APY on CDs), variable rate
  • Minimum balance: Varies; higher balances can be linked to higher APYs 
  • Can you add money? Yes
  • Withdrawals allowed? Yes, but expect an overall limit on certain types of withdrawals per month
  • Fees: You could be charged fees, including for dropping below the minimum and/or exceeding withdrawal limits

Money Market Accounts vs. CDs – what are they good for?

Now that the basics of these savings vehicles 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 APYs 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 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 you can generally leave it in the account, a money market account could be an option. 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.

CDs vs Money Market Accounts

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This article is for informational purposes only and is not a substitute for individualized professional advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA is not providing any financial, economic, legal, accounting, tax or other recommendation in this article. 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 or any its affiliates. Neither Goldman Sachs Bank USA nor any of its 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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