Money Market vs. CD: What’s the Difference?

Money market accounts and certificates of deposit (CDs) are both popular low-risk savings vehicles that typically offer higher returns than traditional savings accounts. Both account types are insured by the Federal Deposit Insurance Corp. (FDIC) up to $250,000, providing peace of mind for your deposits.

These accounts share not only similarities but also distinct differences. Here’s what you need to know about money market accounts versus CDs to help you decide which option is right for your needs.

Money market accounts vs. CDs: Key differences

While both money market accounts and CDs can offer a safe way to grow your savings, each account has a structure that caters to different financial goals. The main differences between money market and CD accounts are: 

• Access to funds: With a CD, your funds are locked up for a specific term, ranging from a few months to several years. During this time, you won’t be able to make withdrawals unless you are willing to pay a penalty. With a money market account, you can typically withdraw funds as needed. 
• Interest rates: CDs tend to offer higher interest rates than money market accounts, rewarding you for the commitment of tying up your funds. Rates are often fixed, meaning they won’t change throughout the term. Money market accounts typically have lower rates, and because these rates are variable, they could change anytime. 

However, money market accounts typically earn more in interest than traditional savings accounts. 

When comparing a money market account versus a CD, other differences can include minimum deposit requirements, monthly fees and access to ATMs. Let’s take a closer look at each account to help you understand the pros and cons of each option.

What is a money market account?

A money market account (MMA) is similar to an interest-bearing checking or savings account. These accounts aim to provide a balance between earning potential and accessibility, allowing you to make withdrawals as needed. The interest rate on an MMA is variable, meaning it can change based on market conditions anytime after the account is opened. 

Interest rates vary significantly between banks and credit unions, but as of early 2025, the best money market accounts earn an annual percentage yield (APY) between 4.0% and 5.0%. 

Some banks expect a minimum deposit to open a money market account. Others may require a minimum balance to earn interest or avoid monthly fees. These minimum requirements vary between banks and credit unions, so you may need to do some research to compare your options.

You can generally make unlimited deposits into a money market account, allowing you to consistently grow your savings. Much like a checking account, an MMA gives you easy access to your funds through methods including checks, debit cards and online transfers. 

However, limits may apply to the transactions you can make monthly by check, debit card or electronic transfer. Exceeding these limits may result in fees or even the conversion of your MMA to a different type of account — meaning you’ll want to avoid this if possible.

Pros and cons of money market accounts

What is a certificate of deposit?

A CD is a type of savings account that pays interest over a set period of time, or term. CDs typically come with fixed interest rates, but in exchange for this predictable return on your investment, you won’t be able to access your funds until the account reaches maturity. 

CD terms typically last between a few months and a few years. If you need to cash out early, you’ll face an early withdrawal penalty, which is equal to a certain number of days’ interest. For example, if a bank has an early withdrawal penalty of 90 days, you would be charged the equivalent of three months’ interest. 

Be aware that CD terms often automatically renew unless you ensure that you cash out your money when the term ends. Make sure you are on top of that before your account matures.

CDs generally offer higher interest rates than MMAs and other savings accounts, though rates vary between banks and credit unions. Market conditions and term lengths also influence your rate. Sometimes a longer-term CD pays more competitive rates, and other times you’ll get a better rate with a short-term CD. 

Some banks may offer CDs with no penalties, allowing you to make withdrawals freely after a certain period, but rates tend to be less competitive for these accounts than traditional CDs. 

A minimum deposit of at least $500 is commonly required to open a CD, though these requirements can vary. Unlike a money market account, a CD typically does not permit you to make additional deposits — so you’ll want to make sure your initial deposit is large enough to maximize your earning potential. 

CDs typically don’t have monthly maintenance fees, but money market accounts may have these if you don’t meet minimum balance requirements.

Pros and cons of CDs

When to choose a money market account

You’ll want to choose a money market account if you have a big cash balance and you want to earn interest on it but maintain access to your money. Here’s more about situations when you might want to choose an MMA instead of a CD: 

• You want to be able to withdraw money. While you may not want to keep your entire emergency fund in an MMA because of potential transaction limitations, it may be a good place for a portion of it. You’ll earn more interest than a regular savings account, and you’ll have quick access to the cash if you need it. 
• You regularly write checks or make electronic transfers. Many money market accounts come with debit cards and check-writing privileges, making them more convenient than a CD if you plan to make frequent transactions.
• You’re comfortable with fluctuating interest rates. MMAs typically have variable rates, meaning they can go up or down based on market conditions. If you’re willing to deal with fluctuating rates, an MMA could be a good choice.

When a CD might be a better choice

Alternatively, here are some times when a certificate of deposit might be a better option: 

• You want a guaranteed interest rate. MMAs have variable rates, meaning the APY can change anytime. But with a CD, your interest rate is typically fixed the entire term, which may be preferred if you’re worried about market conditions worsening. 
• You want a higher interest rate than a money market account. CDs often have higher rates than money market accounts in exchange for less flexibility.
• You’re saving for a long-term goal or milestone purchase. If you’re saving for a longer-term goal, such as a down payment on a house, your child’s college education or even a vacation, a CD can provide predictable growth. 

And because you usually can’t access your funds without paying a penalty, you’ll be less tempted to dip into your savings.

Frequently asked questions

Can you write checks from a certificate of deposit? 

No, you cannot write checks from a CD. This is because the money you deposit into a CD is not intended to be accessed until the account reaches maturity at the end of the term.

Is your money stuck for a set time in a money market account? 

No, your money is not stuck for a set time in a money market account, as it is with a CD. You can deposit and withdraw funds as needed.

How do interest rates work for CDs and money market accounts? 

CDs usually come with fixed interest rates, while rates on money market accounts are typically variable. Whether you choose an MMA or a CD, the rates will also depend on your account balance and your financial institution.