When it comes to saving, you have options beyond the standard savings account you've had since you were a teenager.
A CD, money market and high-yield savings account are three places you can stash your cash to grow at a much faster rate than with a normal savings account. All offer an above-average savings rate, but they differ in how exactly they work.
CD vs. money market vs. high-yield savings account
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What's a CD?
A CD, or certificate of deposit, is a deposit account that offers a fixed interest rate for a specific amount of time, such as six months, one year, or five years. You typically make one deposit when you open the CD and you can't withdraw your funds until your CD term is up, or else you pay a penalty fee and lose out on potential interest earnings.
A top CNBC Select CD pick:
Barclays CDs
Annual Percentage Yield (APY)
From 2.00% to 4.15% APY
Terms
From 6 months to 60 months
Minimum balance
None
Monthly fee
None
Early withdrawal penalty fee
A penalty may be charged for early withdrawal.
Terms apply.
What's a money market account?
A money market account is another type of savings deposit account that functions as both a savings and checking account in one. Its savings rate is variable, meaning it can change at any time. Its checking account features can include check-writing privileges, debit cards, ATM access, and even out-of-network ATM fee reimbursements.
Vio Bank Cornerstone Money Market Savings Account
Annual Percentage Yield (APY)
3.45% APY
Minimum balance
$100 minimum deposit
Monthly fee
$5, unless you opt for paperless billing
Offer checks?
No
Offer debit/ATM card?
No
Terms apply.
What's a high-yield savings account?
You've likely come across a high-yield savings account before. These savings deposit accounts operate just like a traditional savings account but with a higher APY offering. Like all savings accounts, a high-yield savings account's APY is variable. Banks set their own withdrawal rules, but many enforce a limit of six withdrawals or transfers per month.
Newtek Bank Personal High Yield Savings
Annual Percentage Yield (APY)
4.35% APY
Minimum balance
$0.01 to earn interest
Monthly fee
None
Maximum transactions
Up to 6 free withdrawals or transfers per statement cycle; transaction amount limits apply; withdrawals from your account can only be transferred to the original external funding source
Excessive transactions fee
None
Overdraft fee
None
Offer checking account?
Only a business checking account
Offer ATM card?
Yes, if have a Newtek checking account
Terms apply.
CD vs. money market account
A CD and a money market account differ in that a CD offers a fixed interest rate for a specified term, while a money market account has a variable interest rate for as long as the account stays open. Another big difference is the access to your cash. With a CD, you have limited access until your CD term is up, but with a money market account, you have the most access since it operates similarly to a checking account, too.
CD vs. high-yield savings account
A CD and a high-yield savings account stand out from one another because of the fixed interest rate of a CD and the variable interest rate of a high-yield savings account. A high-yield savings account offers better access to your cash than a CD, too, since you can tap your funds whenever (though sometimes up to a limit of six times per month).
Money market vs. high-yield savings account
A money market and high-yield savings account are similar in that they both offer a variable interest rate. The biggest difference between the two is that a money market account is more likely to give you features you typically find with a checking account, like debit card access. High-yield savings accounts usually have a withdrawal or transfer limit of up to six times per month.
Pros and cons
There are both benefits and drawbacks to using a CD, money market or high-yield savings account. We lay them out here:
- Above-average savings rate
- Interest rate is fixed, meaning it won't go down once you open an account
- No monthly fees
- Withdrawing your cash before CD term is up will cost an early withdrawal penalty fee, plus loss of interest
- Usually requires a minimum deposit
- You can't make additional deposits after your opening deposit
- Above-average savings rate
- Checking account features give you easy access to your funds whenever you need them
- Make deposits whenever
- Can find options with no monthly fees
- Interest rate is variable, meaning it can go down after you open your account
- May require a minimum deposit or balance
- Above-average savings rate
- Access your cash up to a certain limit per month, typically
- Make deposits whenever
- Can find options with no monthly fees
- Interest rate is variable, meaning it can go down after you open your account
- Typically monthly withdrawals or transfer limits
- May require a minimum deposit or balance
Best ways to use
Although CDs, money market accounts and high-yield savings accounts are all deposit accounts that let you earn interest, each one is suited for a different need.
A CD is best when interest rates are relatively high (or you feel they are going to fall), as long as you're OK keeping your money tied up for a certain amount of time. A money market account is best if you want the greatest access to your savings (in addition to a high return), since it offers checking account features. A high-yield savings account is best if you simply want a savings account but with a higher APY.
CD vs. money market vs. high-yield savings account
| CD | Money market account | High-yield savings account | |
|---|---|---|---|
| APY | Above-average | Above-average | Above-average |
| Fixed or variable rate | Fixed | Variable | Variable |
| Monthly fees | None | Depends on bank | Depends on bank |
| Minimum deposit/balance requirements | Typically requires a minimum deposit | Depends on bank | Depends on bank |
| Access to cash | Limited; wait until CD term ends | Unlimited; has checking account features | Varies; usually up to 6 monthly withdrawals/transfers |
| Additional deposits | Not allowed | Allowed whenever | Allowed whenever |
FAQs
What's better, an MMA or CD?
When deciding if a money market account (MMA) is better than a CD, it's all about what you're looking for. With an MMA, you can get an above-average savings rate and easy access to your cash with its checking account features. With a CD, you can lock in a good savings rate for a number of months or even years, but you won't be able to touch those funds until your CD term is up.
What's better, a high-yield savings account or a CD?
A high-yield savings account is best if you just want to upgrade your traditional savings account to one earning a higher return. A CD is best if you want to lock in a high APY and are OK leaving your savings untouched for a certain amount of time.
What's the difference between an MMA and a high-yield savings account?
The biggest difference between an MMA (money market account) and a HYSA (high-yield savings account) is that the former offers checking account features, and thus easier access to your cash, while the latter often imposes a monthly withdrawal or transfer limit.
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