First the similarities between them include that both of these investment types are earning at or below 1% APY on most of their accounts. You can obtain an APY on a CD, but your term will have to be at minimum 5 years in most instances. There are exceptions, but that is not the average.
At the beginning of March 2011 the average money market account for deposit below $10,000 was at an APY of 0.67%. For a certificate of deposit, the 1 year CD is earning on average 0.98% APY. Both types of accounts have their principals insured by the FDIC up to and including the amount of $250,000.
The interest rates for both are of a fixed term with a few exceptions. There are rising CD rates that allow for the interest to be increased once during the term. As for MMA, if the interest on the Bank Rates rises, so does the earnings in the account, it is automatic.
The biggest difference between these accounts is the access you have to the funds. With a CD the principal is locked away for the term of the CD. If you take an early withdraw, there is a penalty that will be accessed.
The money market account allows for 6 withdraws per month without any penalties being accessed. After that point there is generally a fee of $5 per withdraw.
At this time the best 1 year CD is from the Navy Federal Credit Union that is offering an APY of 3.50% to its members. The best one from a bank is from Metropolitan National Bank that is offering a 1 year CD with an APY of 1.35%. The best money market account from a bank is from AmericaNet Bank that is offering a MMA with an APY of 1.75%.
This is the basics on how Money Market Accounts vs. CDs compare. Always invest with caution.
We strive to bring you the latest and most accurate data possible from the home sites of the financial institutions we name. Always remember, the bigger the risk, the larger the reward or loss. Invest with caution.
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