I got two questions, first and I'll use Ally Bank as a example, their savings account has a APY of 1.00% and there Money Market is 0.85%. If I got this right, The Money Market account has a lower APY because it gives you more access to your money? My second question is that Ally's savings account has a APY of 1% and they offer a CD for 9 months with a 0.64% APY. Wouldn't that mean that I would make more money with their savings account and if so then why would I want to get a CD at this rate?
Answers
My guess is that banks don't like short term CDs. The short terms reguire more "paperwork", creating back-end expense. This is like small mortgages. Banks charge higher interest if you don't borrow enough money. This seems counter-intuitive because they are lower risk, which should mean lower interest rates. But mortgages have a lot of expensive "paperwork" which needs to be recovered with a higher interest rate, since there will be little profit from a small mortgage. With a short-term CD, the recovered fee likely translates as a lower rate.
After doing the math, you will determine (as did I) that the Alliant savings account is basically an interest-bearing checking account, yielding 1.05%, with no charge for the first order of checks, or any per-check charge, or monthly maintenance fee. You then link those six transactions/month at Alliant to a brick-and-mortar bank or CU where you have unlimited check writing at no per-check cost. We do this routinely. I suspect we haven't paid a "per-check" fee in decades.