If you’re saving money, you likely want to ensure your hard-earned cash isn’t just sitting around, but actively working for you. That’s where the big debate between certificates of deposit (CDs) and money market accounts (MMAs) comes into play.
While CDs have long been a go-to for guaranteed yield, money market accounts offer a flexible twist to the savings game. Here’s a look at five unexpected advantages MMAs have over their more rigid counterpart, the CD.
1. Fee-free access to your cash
First up, and perhaps the most liberating, is the access MMAs offer. Unlike CDs, which lock your money away for months or even years, MMAs allow you to dip into your funds without a penalty. (You may be limited to six or fewer convenient withdrawals, per old rules under Regulation D, but this varies by bank.)
This feature is a game changer for anyone who flinches at the thought of their money being completely untouchable. You can pay bills, cover emergencies, or even indulge in a spontaneous treat without facing the early withdrawal penalties that come with CDs, which can be as high as six months of interest.
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings  APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY)Â is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Member FDIC. |
APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY)Â is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. |
Min. to earn $0 |
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American Express® High Yield Savings  APY 4.25% Rate info 4.25% annual percentage yield as of July 7, 2024 Min. to earn $1 Member FDIC. |
APY 4.25% Rate info 4.25% annual percentage yield as of July 7, 2024 |
Min. to earn $1 |
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Citizens Access® Savings  Min. to earn $0.01 Member FDIC. |
Min. to earn $0.01 |
2. Variable interest rates
While it’s true that CDs often start with higher interest rates — currently around 3.90% APY to 5.25% — MMAs aren’t far behind, with typical rates ranging from 3.75% APY to 5.30% APY depending on the balance. However, they have a trick up their sleeve — their rates can increase.
Since the interest rates on MMAs are typically variable, they benefit from economic tides. So, in a rising rate environment, your MMA could start to outpace your CD rate while offering the flexibility CDs lack.
3. You can write checks
Believe it or not, the good old-fashioned checkbook has its perks in the era of digital wallets and contactless payments. Many money market accounts come with the ability to write checks directly from the account. This feature is a nod to the old school that saves you the hassle of transferring money to a checking account just to cover larger expenses.
Whether it’s paying the contractor for that unexpected home repair or settling the bill at your child’s orthodontist, an MMA keeps things simple and streamlined.
4. A safety net that grows with you
MMAs are like that friend who’s always there, even as your life changes and grows. With no term limits, you can keep your money in an MMA indefinitely, allowing your savings to grow and adapt with you. Depending on where you are in life, you might be saving for a home down payment, building an emergency fund, or stashing away money for retirement. MMAs offer a perpetual safety net without the need to renew or roll over your investments, as you would with CDs.
5. Potential perks and privileges
Banks love customers who keep more of their money with them, and they often show this love through perks associated with higher-balance accounts like MMAs. From waived fees on accounts to higher rates on loans, the benefits can add up. Some banks even offer tiered interest rates on MMAs, which means the more you save, the more you earn.
For instance, balances over $10,000 might earn 3.75% APY, while those over $50,000 could fetch up to 4.05% APY. This kind of preferential treatment can make MMAs not just a place to park your money but a gateway to a more fruitful relationship with your bank.
Money market accounts offer a compelling blend of flexibility, growth potential, and convenience that CDs struggle to match. They strike a balance between the need to access your money and the desire to see it grow. After all, who doesn’t want their money to work as smart as they do? So, the next time you’re pondering where to stash your cash, remember that MMAs could be your savings strategy’s new best friend.
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