If you made it to the point of deciding where you should invest your money, you should have a slight clue on what a money market and certificate of deposit (CD) is. The question is “What is the difference” and “Which one should I pick?”

This question isn’t really that hard to answer. Let’s pick out a few points and from there, you should be able to tell what path you should take.

Access To Your Money

The nice thing about a money market account is it’s almost like a savings account with restrictions. While most money market accounts only allow you to make three to five transactions a month, this is what makes their rates higher than a typical savings account. A savings account allows you to make hundreds of transactions a month without the fees. If you don’t need to access the money a lot then a CD would be the right path since a CD is a locked term. I.E., if you invest into a one-year CD, then the bank will hold your money for one year. You may withdrawal your money at any given time but fees will be applied.

Fixed Rates

A lot of the times when you search for money market and CD rates, you may find that the rates are very similar. The question is “Why should I invest in a CD when I’m not able to touch my money for a while?” The answer is simple. The rate isn’t fixed on a money market. This rate can change at any time. With a CD, you’ll know that the rate you invest with will be the rate throughout that length.

Extra Features

Similar to the access to the money, if you’re satisfied with putting your money into an account and letting it sit there for a long period of time then a CD is definitely for you. If you want all the bells and whistles such as a debit card, checkbook, etc., then you may want to take the money market path. Once again, you will be limited to how many transactions you make a month. Every bank varies but you will find that you usually can’t make more than five transactions.

These are the three important points when it comes to deciding which you should invest in. The biggest point out of the above is how much you rely on that money that’s being invested. If you don’t have a lot saved up and you may need to dip into that cash, then the money market is going to be your choice. You will still get a decent rate but you may find that it won’t be as good as a CD.

Money market rates usually don’t change that often. You’re usually not going to see your 5.00% rate drop to a 2.50% overnight. The rates go with the market. If your money market rate is going down, chances are the CD rate market is going down as well. Just remember that if you invest in a CD, the rate is locked.

If you’re worried about your rates, go with the CD. If you want all the bells and whistles and you want access to your cash all the time without the penalties, go with the money market account, it’s that easy!