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undefinedBuilding wealth isn’t always tied to how much you earn — it’s important to also focus on how much you save.

By putting aside part of every paycheck, you can start saving up for your goals, whether it’s to travel the world or build an emergency fund. But what are your options for safely and securely growing your savings? Traditional savings accounts are safe and secure, while the stock market can be unpredictable.

Luckily, you have two other FDIC-insured savings options: a money market account and a certificate of deposit (CD). Both offer attractive interest rates and steady savings, making them useful additions to your financial toolbox. Now, the question: Which one is right for you?

We’ve outlined the key differences between money market accounts and CDs, so you can understand which one matches your goals.

What is a Money Market Account?

A money market account is a close cousin to a traditional savings account, but typically offers a higher interest rate and higher balance requirements. If you’ve been able to build up your savings, this may be a good option for you.

A money market account may:

  • Offer higher interest rates than a savings account
  • Earn more interest when you increase your balance
  • Give you the flexibility to access your money at an ATM or via check1

The benefit of having your money in a money market account is the potentially higher interest rate, as well as flexibility. Typically, you can access your money at an ATM and, in some cases, even write checks from your money market account. It all depends on who you open a money market account with, so if you go this route, be sure to understand the interest rates and any fees and limitations.

If you need a little motivation to save, consider a BMO Harris Select Money Market® account. Through this account, your interest rate may be higher when you have a higher balance — and you can waive monthly maintenance fees if you set up Auto Save for at least $100 per month, or keep a minimum balance (get details here). Score!

Note: Typically, higher deposits will earn a higher the return.

US-CD-MMA-2What is a Certificate of Deposit?

A certificate of deposit (CD) is a unique way to save money and get competitive returns. When you open a CD, you agree to keep your money in the account for a certain length of time in exchange for typically higher returns on your deposit.

A CD may:

  • Offer higher interest rates than a money market account
  • Let you choose the length of your term (usually between one month and five years)
  • Earn a higher fixed interest rate, the longer you lock in
  • Require you to keep your money in until the maturity date to avoid early withdrawal penalties

If you withdraw your money before the maturity date, there may be penalties or fees involved. In order to avoid fees and penalties, it’s best to keep your money in the CD until the end of the term.

Opting for a CD can make the saving process a bit easier, as your cash isn’t as accessible as a money market account (so you won’t dip in to buy new shoes). If you want to produce a consistent cash flow, consider using a CD laddering strategy. You’ll benefit from the higher interest rates of longer-term CDs, while being able to access your money if needed.

Money Market Accounts vs CDs

As you can see, money market accounts and CDs are unique savings vehicles that offer various perks for those looking to maximize their savings and returns.

When it comes to putting your money in a money market account or CD, there are several things you should consider first:

  • How much flexibility do you need?
  • Are you looking for a variable or fixed APY?
  • What minimum balances or deposits do you need to set up and maintain an account?
  • Are there any fees or early withdrawal penalties associated with the account?

If you’re looking for day-to-day flexibility and the ability to easily access your funds1, a money market account may be a better fit for you. However, if you can afford to hold your cash for longer periods of time and don’t need the cash right away, a CD may produce a higher return.

Note: If your savings allow it, you may also want to consider using both a money market account and CDs to have ready access to funds while holding some cash in higher yielding options.

In other words, when it comes to choosing a money market account or certificate of deposit, it really comes down to convenience and flexibility. For day-to-day use1 and short-term savings, a money market account can be a great fit. On the other hand, a CD is more binding and makes your cash much less accessible, but in exchange, you can get a higher return on your deposit.

At BMO Harris Bank, your money is FDIC insured with both a money market account and a certificate of deposit, offering more security and less risk than other investment alternatives provided by non-banks.

If you’re thinking about supercharging your savings, look for the best rates on certificates of deposit and money market accounts and clearly understand any minimums, fees, and limitations with the account. Have any questions? We have answers. You can stop by your local BMO Harris branch or give us a call at 1-888-340-2265 to get started today.


1 Subject to transaction limits

Banking products and services are subject to bank and credit approval. BMO Harris Bank N.A. Member FDIC.

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