What Are the Key Differences Between CDs and Money Market Accounts?


Quick Answer

Money market accounts and certificates of deposit differ on interest rates and liquidity, according to Discover. Certificates of deposit are investments with banks that have fixed yields, terms and renewals. In contrast, money market accounts have no time limits, varying interest rates, and limited withdrawals or deposits.

Continue Reading
Related Videos

Full Answer

Certificates of deposit offer security through fixed interest rates, explains Bankrate. This makes them a great investment during periods of decreasing interest rates. A certificate of deposit with a longer term is likely to have a higher interest rate. Long-term certificates of deposit are a good option for investors not worried about liquidity.

Money market accounts are a lot more flexible than certificates of deposit, and current economic conditions determine their interest rates. Investors benefit from this flexibility during times of increasing interest rates, but there is also the risk of that rate declining, notes Bankrate.

Closing a certificate of deposit account or withdrawing money from it comes with significant penalties, reports Bankrate. In contrast, a money market account allows for a fixed number of withdrawals and unlimited deposits per month. The FDIC insures both certificates of deposit and money market accounts, protecting investors' money if there are problems at the issuing bank.

Learn more about Bank Accounts

Related Questions