Money Market Account or Certificate of Deposit?

So you want to stash some cash in a safe place but aren’t sure whether or not to open a money market account or a certificate of deposit. Here are some things to consider.

Money Markets Offer Checks

First, let’s look at how these products work. A money market account is basically a savings account, but pays more than many regular savings or checking accounts. Right now the average yield on money market accounts is 1.3%, nothing to write home about but you do get a small return on your money.

Money markets usually allow you to write a limited number of checks. Money market rates can fluctuate. Begin hunting for money market rates here.

CD Rates Vary Based on Term

Certificates of deposit tie up your money for specific periods of time for the privilege of earning interest. CDs can have a maturity of a few weeks to several years. The longer your money is in a CD, the higher the rate of interest you can get. Right now, the average 2-year CD rate is 1.96%. Search for CD rates here.

If you want your money to stay safe, CDs offer FDIC insurance up to $250,000 per individual. But you won’t have access to your money during the term of the CD and have to pay a penalty for early withdrawal.

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