When it comes to saving money securely while earning interest, Certificates of Deposit (CDs) and Money Market accounts are two standout options. But how do they differ, and which one fits your financial goals best?
Let’s break it down.
What Is a Certificate of Deposit (CD)?
A CD is a time-bound savings product. You deposit a fixed amount of money for a set term—say, 6 months to 5 years—and in return, you earn a fixed interest rate. The catch? You can’t touch the money until the term ends without paying a penalty.
Benefits of CDs:
- Higher fixed interest rates
- $500 minimum to open
- Predictable returns
- FDIC insured
What Is a Money Market Account?
A Money Market account is a type of savings account that typically offers higher interest rates than regular savings accounts, along with limited check-writing and debit card access. Unlike CDs, Money Markets allow you to access your funds more freely.
Benefits of a Money Market:
- Flexible access to funds
- Variable interest rates
- $50 minimum to open, $10,000 minimum balance to avoid $10 monthly service charge
- FDIC insured
Which One Should You Choose?
- Go with a CD if you want a guaranteed return and won’t need the money for a while. For example, a CD would be a great choice for starting a college fund for your child or setting aside money for retirement.
- Opt for a Money Market if you want to earn interest but still need access to your funds for emergencies or short-term goals. For example, a Money Market would be a great choice for a “rainy day” fund.
Both CDs and Money Markets are excellent low-risk savings tools, and both allow you to add money into the account whenever you’d like. The best choice depends on your personal financial goals, timeline, and need for liquidity. In fact, many savvy savers use both to balance growth and flexibility. Peoples Bank offers Personal CDs, a Great Beginnings CD, CD specials, Money Markets, Individual Retirement Account (IRA) options, youth savings, and regular savings accounts. For more information, please visit your local branch or give us a call. We are happy to help!
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