Are you trying to decide between a certificate of deposit (CD) and a money market account (MMA)?  The short answer is that you’ll usually earn more from a CD account. However, the CD will require you to lock your money up for the entire term until the maturity date is reached. With a money market account, there’s no need to lock your money away until a set date.

Both options will bring you the benefits of long term savings. Let’s dive into their main differences and help you determine which is best for your personal finances.


Differences Between a CD and MMA

“CDs and Money Market Accounts offer great opportunity for those who want to invest. Both offer competitive rates and are FDIC insured. Also, these two options are customer-directed, not dependent on the discretion of an investment consultant or the whims of the stock market.”

 — Linda Schacht, AB&T Personal Banker

Money Market Account

A money market account (also known as MMA) is similar to a savings account but with a higher interest rate contingent on your account’s balance. Basically, the more you save the more you make in interest. Interest is earned on a monthly basis.

Money market accounts tend to be more flexible since this type of account is not set up for a specific length of time. Account owners are not locked into a MMA and can get out of one without paying a penalty.

Money market accounts have a certain amount of withdrawals you can make, which can be done via checks, debit card, or ACH transfers.

Certificate of Deposit

On the other hand, a certificate of deposit differs from money market  because it has  a set term. When you open a CD, you will agree to a set length of time by establishing a maturity date. This frame of time can range from anywhere between 91 days up to 5 years.

A CD is a traditional approach to saving money and can offer account owners a sense of security about their investments. An early withdrawal is possible, but there is a financial penalty involved.

The account owner chooses the rate of interest (known as Annual Percentage Yield) and the term (or length) of the CD, and the earned interest is either compounded or paid out annually. Most CDs retain their initial interest rate throughout the life of the deposit.

Occasionally, banks may offer a special Raise-A-Rate CD, which gives the account owner the chance to ask for a higher rate of interest one time during the life of the CD. Either way, the interest rate will not decrease as long as the CD is current.


Which Account is Right for You?

money market account tends to be more accessible than a CD. This is because there isn’t a set time to deposit or withdrawal the funds. If you don’t consider yourself a planner or someone who sets timely goals, the MMA might be best for you.

“Money market accounts are great for customers who want to save money at a great rate of interest, but who aren’t sure that they won’t need the money for an unexpected expense,” explained Linda. “There is no monetary penalty for early withdrawal, although the earning potential could be adversely affected by a lower account balance.”

Benefits of Money Market Account: 

  • Federally insured up to $250,000
  • Withdrawals can be done via checks, debit card or ACH transfers
  • No financial penalty for early withdrawals
  • Flexible length of time

CD account requires a set amount of time before the withdrawal on the maturity date. If you prefer to spend money at your own free will, you may enjoy the constraints of a CD to save money with more control.

“CD accounts are secure and dependable, which is the reason that many customers choose them,” describes Linda. “Also, at the end of the CD’s term, the customer can either re-invest in another CD or they can let the CD roll over on its own and keep earning at a comparative rate.”

Benefits of Certificate of Deposit Account:

  • Federally insured up to $250,000
  • Fixed-date withdrawal (maturity rate)
  • Fixed-rate earnings greater than savings account
  • Guaranteed returns
  • Secure & dependable


American Bank & Trust Has Both

Both a CD and money market account offer great potential earnings for future savings.

At American Bank & Trust, we have online applications to kick off the process of applying for a money market or CD account.

If you have more questions, our team of personal bankers are here to help you get started. Spend some time looking online at personal saving options, and reach out to us with any questions or to set up a savings account!

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