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CDs vs. money market accounts: Which one is right for you?

cd-vs-money-market

Finding a safe place to store extra money can be nerve-racking, especially during uncertain financial times. Luckily, certificates of deposit and money market accounts can be good solutions for those looking to get a little return on their savings without sacrificing safety. These accounts seem similar at first glance, but there are some differences that are important to know about before investing. We’ll break down the details to make it easy to decide which one is right for you.

Certificates of deposit (CDs)

CDs are similar to savings accounts because they’re insured by the FDIC, which means they’re very low-risk. However, you receive a higher interest rate than normal savings accounts because you’re agreeing to not touch that money for a period of time (typically between a few months and a few years). We offer CDs in 1 month, 6 month, 12 month, 36 month, and 48 month terms, but we can be flexible if you need a different time period.

Pros:

  • CDs are low-risk because they’re insured by the FDIC.
  • They receive higher interest rates than savings accounts.
  • They have flexible terms, so you can choose how long you’d like to invest your money.

Cons:

  • You can’t touch your money during the CD’s term without incurring a penalty.
  • They typically require a larger minimum investment than a money market account.

Money market accounts

Money market accounts are like savings accounts with a higher interest rate. If you have a large amount of money to store, these accounts are a good solution because they provide a higher return without locking your money down in a CD or other investment.

Pros:

  • Money market accounts are low-risk because they’re insured by the FDIC.
  • They receive a higher interest rate than regular savings accounts.
  • Your money is always liquid, so you can access it at any time.
  • The minimum investment is typically lower than a CD.

Con:

  • They receive a lower interest rate than CDs.

While CDs and money market accounts have individual benefits and disadvantages, both are smart, low-risk ways to store money and grow your nest egg. To learn more about these accounts and chat more about which one is right for you, give us a call at 480-358-1000.

photo credit: Phillip