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How is a Savings Account Different From a Money Market Account or CD

Written by Qanaria Team
Updated February 13, 2023

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Understand the basics of savings accounts, money market accounts, and CDs.

  • Savings accounts are offered by banks and credit unions, and they are designed to be a safe place to store your money. They usually offer a relatively low-interest rate, but they also come with convenient features such as the ability to make deposits and withdrawals at any time and the option to set up automatic transfers from your checking account. Savings accounts are FDIC-insured, which means that your money is guaranteed up to $250,000 in the event that the bank fails.
  • Money market accounts are similar to savings accounts in that they offer a low-interest rate and the ability to make deposits and withdrawals. However, they often have higher minimum balance requirements and may require you to pay a fee if you go below the minimum balance. Money market accounts are also FDIC-insured, so your money is safe in the event that the bank fails.
  • CDs are offered by banks and credit unions, and they are a type of time deposit. This means that you agree to leave your money in the CD for a specific period of time, usually anywhere from a few months to several years. In exchange for committing to this time period, you receive a higher interest rate than you would with a savings account or money market account. CDs also have the added advantage of being FDIC-insured.

Consider the liquidity of these accounts.

  • Savings accounts and money market accounts are highly liquid, meaning that you can access your money at any time. CDs, on the other hand, have a set term, and if you need to withdraw your money before the term is up, you may have to pay a penalty. This means that CDs are less liquid than savings accounts and money market accounts.

Compare the interest rates.

  • Savings accounts and money market accounts typically offer a lower interest rate than CDs, but they also come with more flexibility and the ability to access your money at any time. CDs, on the other hand, offer a higher interest rate in exchange for committing your money for a specific period of time.

Decide which account is right for you

When deciding which type of account is right for you, it's important to consider your financial goals and your time horizon. If you have a short-term goal and need access to your money in the near future, a savings account or money market account may be the best choice. If you have a longer-term goal and can commit your money for a longer period of time, a CD may be a better option.

Explore the offers below to find the best savings accounts, money market accounts, and CDs currently available.

In summary, savings accounts, money market accounts, and CDs are all useful tools for saving money and earning interest. However, they differ in terms of liquidity, interest rate, and the level of flexibility they offer. By considering these factors and your financial goals and time horizon, you can determine which type of account is right for you. If you're ready to start saving, be sure to click on the offers below to explore some of the best options currently available.


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