What’s the Difference Between Money Market Accounts, CDs and Savings Accounts?
There are multiple ways to earn interest on your cash reserves. Savings accounts, certificates of deposit (CDs) and money market accounts (MMAs) are all great options for setting your money aside and watching it grow. But these accounts are unique in some key ways. Understanding how they work can help you decide how you might use them to bulk up your savings.
| Savings Account | CD | Money Market Account | |
|---|---|---|---|
| Minimum balance requirement | Can range from $0 to $100,000, but many have no minimum balance requirement | Some may require $500 to $2,500; jumbo CDs often require at least $100,000 | Can range from $0 to $10,000 to qualify for the best interest rates |
| Interest rates | Lower for standard savings accounts; higher for high-yield savings accounts | Higher | Higher |
| Liquidity | May be limited to six free electronic transfers and withdrawals per month | Taking money out before the term ends typically results in an early withdrawal penalty | May be limited to six electronic transfers and withdrawals per month |
| FDIC or NCUA insurance | Yes | Yes | Yes |
| Check-writing access | No | No | Most money market accounts come with a checkbook or debit card |
| Debit access | No | No | Common feature |
| ATM access | Yes | No | Yes |
What Is a Savings Account?
A savings account can hold money you're setting aside for short-term financial goals, whether that's a down payment on a car or an upcoming vacation. It can also be a great place to park your emergency fund because you can earn interest and access your money easily if you run into a surprise expense.
Yields on traditional savings accounts are on the low end. As of December 2025, the national average rate was just 0.39% for standard savings accounts, according to the Federal Deposit Insurance Corp. (FDIC). But you can expect much better rates on high-yield savings accounts. As of December 2025, some offered annual percentage yields (APYs) as high as 5%.
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Pros and Cons of Savings Accounts
Here are some important things to consider when looking for a savings account.
Pros
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Security: Virtually all savings accounts from banks are FDIC insured for up to $250,000 per account holder, account type and financial institution. The National Credit Union Administration (NCUA) offers the same protection for funds held at credit unions.
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Competitive interest rates: If you opt for a high-yield savings account, you could secure a higher-than-average APY. That can help your money grow faster.
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Availability: It's quick and easy to withdraw funds from a savings account. You can opt for an electronic transfer or access your money at an ATM.
Cons
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Free electronic withdrawals may be limited: Some financial institutions put a cap at six per month. You might be charged a fee if you go beyond that, though ATM withdrawals are usually unlimited.
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May be a minimum balance: Failing to keep a certain amount of money in your account could lead to fees or result in a lower APY.
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Other fees may apply: Bank fees may kick in if you overdraw your account, use an out-of-network ATM or don't make a deposit or withdrawal for an extended period of time.
Learn more:How Many Savings Accounts Should I Have?
What Is a CD?
When you put money into a CD, it's meant to stay there until the term ends. This can be anywhere from one month to five years or longer. When the account matures, you'll get back your deposit, plus interest. Interest rates are typically fixed, though some allow you to adjust your rate throughout the term.
Minimum deposits vary from $0 to $2,500—and jumbo CDs often require $100,000 or more. But as of December 2025, some CDs offered APYs up to 4.50%.
Pros and Cons of CDs
Like other types of deposit accounts, CDs come with unique pros and cons. Here are a few things to have on your radar.
Pros
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Attractive rates: CDs can provide higher-than-average APYs, which can put more power behind your savings. They can also be a great place to park money you don't plan on spending in the immediate future.
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Guaranteed returns: It's highly unlikely that you'll lose money with a CD. Most are insured for up to $250,000 per account holder and financial institution.
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Diversification: Saving using CDs can help diversify your portfolio and spread out investment risk. In this way, it can be one part of an overarching financial plan.
Cons
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Lack of liquidity: Be prepared to part with your money for the length of the CD term. You also cannot access your funds through an ATM. For these reasons, it isn't wise to keep your emergency fund in a CD.
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Fees may apply: Tapping your account before the term ends will likely trigger an early withdrawal penalty. The amount varies but could be equal to six months' worth of interest in some cases.
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Interest rate risk: After locking your money into a CD, it's always possible that interest rates could go up. That means you could miss out on potentially stronger returns in the meantime.
Learn more: How Much Money Should I Put in a CD?
What Is a Money Market Account?
A money market account is like a savings account in that your money will earn interest, and your funds are insured for the same amount. But unlike a savings account, you can also make debit transactions and write checks. That allows for easier access to your funds. As of December 2025, some money market accounts had APYs as high as 4.50%.
You can use this type of account to build your emergency fund, save for other near-term goals or pay recurring monthly bills.
Pros and Cons of Money Market Accounts
You'll want to keep the following details in mind when looking for a money market account.
Pros
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Liquidity: Thanks to their debit access and check-writing capabilities, money market accounts offer flexibility and quick access to your money.
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Competitive interest rates: Yields on money market accounts often far exceed rates on traditional savings accounts. That can help your money grow at a faster clip.
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Low risk: Most money market accounts are FDIC- or NCUA-insured, so the risk of losing money is extremely low.
Cons
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May be a cap on free withdrawals: As with savings accounts, it isn't uncommon for money market accounts to limit free electronic transfers and withdrawals. That's an important detail if you plan on frequently using your debit card or paying bills out of the account.
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Might need a hefty opening deposit: Many money market accounts have low (or no) minimum opening deposit requirements, but in some cases, it could be upwards of $2,500. Minimum balance requirements might also apply.
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Won't be enough to grow your nest egg: Other investments typically offer better long-term returns than money market accounts. That includes the stock market, which has historically had an average annual return of around 10%.
Learn more: Are Money Market Account Rates Locked In?
Which Account Should I Choose?
If you're looking for the best place to grow your money, you have options—and it doesn't have to be an all-or-nothing decision. You might choose to keep your emergency fund in a high-yield savings account or money market account, then use CDs to save for short-term financial goals.
When to Choose a Savings Account
Opening a savings account goes hand in hand with building a strong financial foundation. Here are some scenarios where it makes the most sense:
- You need a safe place to keep your emergency fund. You want your cash savings to be safe and accessible if a financial emergency sneaks up on you, whether that's an unexpected bill or job loss. A savings account allows for electronic transfers and ATM withdrawals.
- You want simplicity. Many savings accounts do not have opening deposit minimums or account balance requirements. Consider it a simple, safe holding place for your money.
When to Choose a CD
A CD could be a great option if you're comfortable losing access to your money for a bit. You can choose a short-term or long-term CD based on your financial goals. You might opt into a CD if:
- You want a higher APY. A CD might unlock a potentially higher interest rate, which could help accelerate your savings—and get you to your financial goals a little faster.
- You're OK giving up access to your money. A CD may be worthwhile if you don't mind parting with your money for a predetermined amount of time. This is the best way to avoid an early withdrawal penalty, so you'll want to review your situation carefully before making a decision.
When to Choose a Money Market Account
If you've got a substantial amount of cash and want to access it easily, a money market account may be the way to go. Consider this option if:
- You have a bigger balance. Many money market accounts reserve their best rates for those who maintain a high minimum account balance. That could help your money work harder for you.
- You need flexibility. With a money market account, you can set up autopay for specific bills, or write checks or swipe a debit card to cover certain expenses. That could come in handy if versatility is important to you.
Learn more: How Much Should I Save Each Month?
Alternative Places to Grow Your Money
Depending on your financial goals and timeline, you might decide that the options above aren't the best fit. In that case, consider one of the following alternatives:
- 401(k): This employer-sponsored retirement account can help you save for the future while enjoying some nice tax benefits. That includes tax-deductible contributions, which will bring down your taxable income ahead of retirement. With a 401(k), you can typically invest in stocks, bonds, mutual funds, exchange-traded funds (ETFs) and more—and enjoy compounding interest along the way.
- Individual retirement account (IRA): An IRA also lets you set aside money for retirement, but you can open one on your own, apart from your employer. Depending on the type of IRA you choose, you can build your nest egg on a tax-free or tax-deferred basis.
- The stock market: When you buy a share of stock or invest in an index fund, you'll own a slice of one or many publicly owned companies. Long-term stock market returns tend to outperform savings accounts, CDs and money market accounts. But stock investing also comes with higher risk—and market volatility is unavoidable.
Learn more: How to Create an Automated Savings Plan
Frequently Asked Questions
The Bottom Line
Money market accounts, CDs and savings accounts can all help grow your money over time, but they each work a little differently. The right one for you will depend on what you're saving for and when you expect to need the money. A CD can be a great spot to keep money you're squirreling away for a future financial goal, but you might go with a savings account or money market account if you need more flexibility.
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About the author
Marianne Hayes
Marianne Hayes is a longtime freelance writer who's been covering personal finance for nearly a decade. She specializes in everything from debt management and budgeting to investing and saving. Marianne has written for CNBC, Redbook, Cosmopolitan, Good Housekeeping and more.
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