RateAPY

Deciding Between a Certificate of Deposit and a Money Market Account

Posted by: RateAPY Bank Rates News
December 30th, 2009

Saving money is important in this economic environment. But how should you allocate your savings–would a certificate of deposit or a money market account be better for you?

Certificates of Deposit

If you have money to lend to banks, you can earn interest. A certificate of deposit, or CD, is a debt instrument. You are lending money to the bank for a specific period of time in exchange for a monetary return. You get to charge the bank to use your money. You get to decide for how long the bank can use your money and the amount of return you expect in exchange. Terms on CDs can be anywhere from a few weeks to several years.

Money Market Accounts

A money market account is similar to a certificate of deposit, except that you have more access to the money by using checks or a debit card. Because your commitment to lend to the bank is less solid, the interest rate for a money market account will likely be less than on a CD.