Money Market Versus Certificate Deposit

Leaving your money in a regular savings account no longer earns you very much money. Usually in a regular savings account you would receive zero point some percentage. A good way to earn additional money is through a high interest bearing account. The two most popular accounts that are available at most banks are the Money Market account and the Certificate Deposit (CD) account. Many people get confused between the two and have trouble deciding which account they could most benefit from.

The Money Market account is a flexible type of account. You can add and take out money anytime you want. However the interest rate is not as high as the CD account. You need to make a minimum deposit in order to have a Money Market account. For example, at Golden One banks you need to put a minimum deposit of $2,500 dollars. The deposit may vary with each bank but it's usually around that much money. How much interest you get from the money depends on the interest rate at the time you made the deposit.

The CD account is a locked account. You earn a higher interest rate on your money than a Money Market account however your money will be locked for a certain time period. You cannot add or take out funds. There are penalties for early withdrawal. You will actually lose some of the interest you gained on the money. The longer you leave it in the account the higher the interest rate. At most banks you can leave the money in the account starting at three months and going as long as five years. Like the Money Market account you need to make a minimum deposit in order to have a CD account. For example, at Golden One they require you make a minimum deposit of $1,000 dollars.

The type of interest bearing account is right for you depend on your situation. How much money do you want to put into the account? Do you need the money right away? What do you want to use the money for? For example, if you only have $1,000 dollars and don't need to money for at least three months then you might want to put it in a CD account. However, if you have over $2,500 dollars and you are not sure if you are going to get a new car in the next six months then a Money Market account might be for you.

Whichever account you decide on it will be better than placing it in a regular savings account. The benefit of a Money Market and CD account are both great. Deciding on a Money Market or CD account will depend on your life situation. Ask yourself those questions to help you decide which account you can most benefit from.