What is the difference between a CD (certificate of deposit) and a money market account? You often hear these two concepts be around and sometimes you wonder if they are interchangeable.
Actually, a CD and a money market account are two different things. The best money market rates to 99% of the time, be less than the best CD rates. I say 99% because you can always find some promotion somewhere from some institution that can make money to pay higher. But under normal cercomstances, CD will pay the higher rate.
The reason for this is that a CD is a tool in time. When you get a CD, you agree to the loan from the bank your money for a predetermined period. CD's evaluated on their time as 6 months, 1 year, 5 years, and so on. The longer your CD along with the more you invest will determine the rate. The important thing is that you have agreed to not take money out until the CD matures. (Most banks will allow you to take money out, but it would be with a penalty)
A money market account is different in that money is more liquid. Various money market accounts have different rules, but all of them, you have the option of a limited transactions. This means that you money is not "locked up" for the bank to secure loans as easily as a CD. Therefore, the interest rate a bank or other financial institution is willing to pay will be less than a CD. With a money market account the more you have, given higher interest rates will probably be, but you have access to the money without penalty. This means that the best money market rate would still be lower than CD rates
Best Money Market Rates
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