Money Market vs. CD: What’s the Difference?

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Updated on Wednesday, May 29, 2019

So you’ve decided to get serious about your savings, or maybe you just have a huge wad of cash you’d like to put in the bank. Either way, you may be considering certificates of deposit (CDs) or money market accounts as your savings vehicle, but which to choose? They both carry advantages and disadvantages. With a money market account, you get flexibility, but then again, maybe you’d prefer the higher rates of interest offered by CDs.

We’ve broken it down for you into APYs, account access, fees and minimum deposit level to help you choose the savings instrument that meets your needs.

 Money market accountsCertificates of Deposit
National average APY0.39%1.38% (1-year CD)
Account access
  • May offer debit card and checks
  • Limited to 6 transactions per month

Only at maturity
FeesVaries from bank to bank
  • Monthly fee
  • Overdraft fee
  • Excessive transaction fee

No monthly fees, but penalties for early withdrawals
Minimum deposit (varies from bank to bank)$0-$25,000$500-$10,000

National average APYs are accurate as of May 2019.

What is a money market account?

A money market account is a hybrid between a savings and a checking account. Money market accounts earn interest, typically at higher rates than standard savings accounts. The national average money market rate in May 2019 is 0.39% APY, while the average savings account rate is 0.28% APY. MMAs also tend to require higher minimum balances than a regular savings account, some even reaching as high as $25,000.

Like a checking account, most money market accounts have the added bonus of check-writing privileges and debit cards. These features can come in handy whenever you need to withdraw money in a pinch. Some money market accounts lack these options and others may only issue a debit card on demand, so shop around if you need the extra access.

You’ll want to keep an eye on the number of withdrawals you make. Like savings accounts, money market accounts are limited to six outgoing transactions per statement cycle, which includes withdrawals and transfers. Going over this limit can result in a fee for every extra transaction, or even the closure of your account.


  • Competitive interest rates
  • May include checks and a debit card


  • High minimum balance requirements in some cases
  • Limited to 6 transactions per month

What is a certificate of deposit?

A CD is a time deposit account that offers limited access to your funds. Each CD has a set term, typically ranging from three months to five years, although select banks can offer a wider variety of terms. Once you open a CD and deposit your funds, you typically can’t touch the money until the term has ended, or matured. At maturity, you can choose to withdraw the funds or renew the account either for the same or a different term. You can also add money into the account at that time.

Because of the range of terms available, CDs open up a variety of savings strategies. A 1-year CD allows you to pursue short-term savings goals. On the other hand, if you have a long-term goal, you might opt for a 5-year CD. If market interest rates are high, opening a 5-year CD can help you lock in strong rates for a long period of time, protecting you from potential downside risks. For all these reasons, it’s key to shop around for the best CD rates before you open an account so you know you’re getting the rates you need for your savings goals.

Another thing to watch out for with CDs is early withdrawal penalties. When you open a CD, you essentially promise the bank that you’ll keep your money on deposit for the length of the term. When you break that promise, the bank assesses an early withdrawal penalty, often expressed as a certain number of days’ worth of interest. For example, if you were to make an early withdrawal from a 5-year CD, you could end up paying a penalty equal to one year’s worth of interest.


  • Opportunity to lock in high rates
  • Wide variety of term lengths


  • Limited access to funds
  • High penalties for early withdrawals

Money market vs. CD: Which account should I open?

Money market accounts are the best choice when you need convenient access to your savings. They allow you to move money in and out of the account, whether online, at the ATM or via checks. CDs aren’t as flexible. If you need to withdraw money in a pinch but the CD hasn’t matured yet, you’ll face a hefty penalty. A money market account is the right place to stash your emergency fund.

Got some extra cash you won’t be needing for a while? Put it in a CD. Keep in mind that while a high deposit may not be a requirement for the CD term of your choice, adding more money to the account at the start will result in more interest earned by the time the account matures. CDs are also better during peak high-rate environments. They allow you to lock in a high rate for years, protecting against future lower rates, unlike variable money market account interest rates.

And keep in mind that while money market accounts and CDs are very different savings vehicles, there’s nothing stopping you from opening both kinds to really maximize your savings. Consider building a CD ladder to really amp up your returns.