CD vs. money market account
A money market account is really a savings account with a checkbook attached. It keeps your money reachable; a CD keeps your rate fixed. Only one of the two can be guaranteed at a time.
| Certificate of deposit | Money market account | |
|---|---|---|
| Rate | Locked in for the entire term | Variable — repriced whenever the bank decides |
| Access | Locked; leaving early costs months of interest | Checks, debit card, transfers — usually 6 withdrawals a month |
| Typical yield today | 4.00% – 4.50% APY | 3.40% – 4.00% APY |
| Minimum balance | Often $500 – $1,000, with no ongoing minimum | Commonly $2,500 – $10,000 to reach the top tier |
| Fees | None if held to maturity | A monthly fee once the balance slips below the tier |
| Best for | Money that has a date on it | Working cash you genuinely spend from |
What a money market account really is
In practice, a savings account that writes checks. Money market accounts (MMAs) pay variable interest just as savings does, carry the same FDIC/NCUA insurance, and add transactional access — checks, frequently a debit card, usually capped at around six withdrawals a month. They are not money market funds, the uninsured brokerage product with a confusingly similar name; if it sits at a bank and quotes an APY, it is the insured kind. Access is the whole pitch, and the pricing reflects it: the best MMA rates trail the best savings rates by a quarter to half a point, and trail CDs by more.
The tier structure is the trap to watch for. Plenty of MMAs advertise a headline rate that only applies from $10,000 or $25,000, pay something forgettable beneath it, and charge $10–15 a month under a floor balance. A 3.90% MMA that falls to 0.40% below its $10,000 tier and charges $12 a month is a negative-yield account at $6,000: $24 of interest against $144 of fees — arithmetic worth doing before the rate impresses you.
The three-bucket way to think it through
Spending money belongs in checking. Reachable reserves — the emergency fund, the money that pays the roofer — suit an MMA or high-yield savings, where the yield difference between the two is usually small enough that fees and interface decide it. Committed money with a date on it belongs in CDs, where the very lockup you would pay a penalty to escape is what buys the higher rate. The expensive mistake is making one account do all three jobs: an MMA holding committed money leaks yield continuously, roughly $130 a year per $25,000 at today’s spreads.
If you notice yourself holding a large MMA balance “to be safe,” run the split: keep the genuinely reachable portion, move the rest into a 12-month CD, and check the combined yield. It nearly always comes out ahead, and the quiz above will tell you whether your situation is the exception.