Money Market Accounts vs. CDs: Which Is Right for You?

April 21, 2025

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Certificates of deposit (CDs) and money market accounts are both popular savings options if you’re looking for a place to park your cash. While both types of accounts typically offer higher APYs than a traditional savings account, each comes with its own benefits and considerations.

Ahead, we’ll go over their key differences, so that you can put together a savings strategy that’s right for you and your financial goals.

What is a money market account?

A money market account is a type of deposit account offered by banks and credit unions. They share a few similar features with checking and savings accounts.

For instance, like a savings account, you can add money as often as you’d like and earn interest (variable APY) on your deposits. And like a checking account, it’s relatively easy to make a withdrawal when you need your cash. Many money market accounts come with a debit card, and some also offer check-writing privileges.

Pro:

You can earn interest on your money.
APY is usually higher than what you could earn with a basic savings account.
Flexible deposits and withdrawals.
FDIC insurance (if you open an account at a FDIC member bank).

Con:

APY may often be lower than what you could get from a CD or high-yield savings account.
Potential limit on the number of withdrawals you can make each month.
Minimum balance requirements.

Good to know: Do not confuse money market accounts with money market mutual funds.

Money market accounts are a type of deposit savings account, where your deposits are insured by the FDIC (if you open the account at a FDIC member bank). These deposit accounts are commonly offered by banks and credit unions.
Money market mutual funds are a type of investment product that’s offered at brokerage firms; they are not insured by the FDIC.

What is a CD?

A certificate of deposit or CD is a popular type of deposit account offered by banks. CDs are usually considered low-risk because you get the return of your principal along with any interest accrued at the end of the CD term. Also, if you open an account at a FDIC member bank, your deposit is insured up to the maximum allowable by law.

CDs usually offer a higher APY than a traditional savings account and money market account. The trade-off for the higher interest rate, however, is that your cash may be less accessible: If you withdraw your money before the CD term ends, you can expect to pay an early withdrawal penalty (unless it’s a no-penalty CD).

Pro:

APY is usually higher compared with a traditional savings account and money market account.
Many CDs come with a fixed APY, so you know exactly how much you’ll earn during the CD term.
A variety of CD terms available (e.g., 3 months, 9 months, 1 year, 3 years, etc.).
FDIC insurance (if you open an account at a FDIC member bank).

Con:

Less withdrawal flexibility compared to a money market account or savings account.
You usually have to pay a penalty if you break your CD early (unless it’s a no-penalty CD).
Cannot add money after the initial funding period.

For a more in-depth look at CDs, check out our article here.

Compare: Money market accounts vs. CDs

Money Market Accounts

CDs

	Money Market Accounts	CDs
APY	Variable rate	Typically a fixed rate
Liquidity	Relatively easy to add or withdraw money.	Limited – your money is locked in for the CD term (unless it’s a no-penalty CD). Cannot add money after the initial funding period.
Minimum requirements	There’s usually a minimum balance requirement; the amount varies bank to bank.	There’s usually a minimum balance requirement; the amount varies bank to bank.
Fees	You may pay a fee if your balance falls below the minimum requirement or if you exceed the withdrawal limits.	You may have to pay an early withdrawal penalty if you take out your funds before maturity (unless it’s a no-penalty CD).

Money market accounts vs. CDs: What are they good for?

If you’re trying to choose between money market accounts and CDs, consider your needs and goals.

For instance, a CD can be a smart option if you have excess cash and are looking to save for a specific and time-bound goal (e.g., like a down payment on a house). You can open an account, lock in a fixed rate, and watch your money grow. When the CD matures, you can withdraw your principal and interest earnings. If you want to continue growing your savings, you have the option to put that money into a new CD.

On the other hand, a money market account may make sense if you need a little more flexibility when it comes to accessing your cash (via debit card or check-writing). You’ll have the ability to add funds to the account whenever you want and earn interest on your money.

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This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may 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. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.