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If you have been researching savings accounts, you may have noticed that there are quite a few different types and that each have their own uses. Two popular ones are Money Market and Certificates of Deposit (CD) accounts, both of which have their own advantages and disadvantages depending on your goals. By understanding what both of these savings accounts have been optimized for, it can be easier to decide which one is best for you.

What is a CD?

A CD is a type of savings account that has a specific and fixed interest rate, term length, and maturity date. It is important to note that, while these types of accounts usually have higher interest rates than other savings accounts, it can be more difficult to withdraw money because of the fixed date of withdrawal associated with CDs.

Why pick a CD?

You can think of a CD as a way to lock the saved funds away until a predetermined future date, all while they are earning interest. CD terms are from a few months to several years. If you want to make a big purchase down the road, a CD may be the ideal way to save. Here is a shortlist of the pros and cons of choosing a CD:

  • Pro: Low risk
  • Pro: Higher interest rates
  • Con: No regular access to money
  • Con: Withdrawal restrictions

What is Money Market Account?

This type of savings account combines features of both savings accounts and checking accounts. When you open a money market account, you receive a debit card and checks, but unlike regular checking accounts, you are only permitted a certain amount of transactions each month. Keep in mind that money market accounts usually have higher deposit and balance requirements than you might have with a traditional savings account.

Why pick a Money Market Account

If you are someone who wants to save money, but still needs easy access to funds, a money market account could be right for you. This is in contrast to CD accounts, where you have no access to the money until the term is up.

Owners of this type of account receive benefits of savings and checking accounts, with some restrictions. Here are a few benefits and disadvantages of a money market account:

  • Pro: Easy access to funds
  • Pro: Good interest rates compared to checking accounts
  • Con: High minimum balance requirements
  • Con: Not as many high-yield options

Both money market and CD accounts have their own advantages, but they are not for everyone. Evaluate your financial goals and talk to a professional to determine which savings option is best for you. Reach out to The Federal Savings Bank today to get started.