Money Market vs. Certificate of Deposit (CD): Where Should I Invest?

Eve Chin, VP Deposit Planning & Strategy, First Republic Bank
October 6, 2021

If you're new to saving money, one of the unwritten rules you'll discover is that you should make your money work for you. In other words, it pays to open up a savings account that earns interest over the balance of the account. The question is, which type of account is best for you?

The two main savings account types to consider are money market accounts and Certificates of Deposit (CDs). Though both allow you to earn interest, they actually differ when it comes to withdrawals flexibility and other account features. 

To help you choose the best savings deposit for your financial goals, here’s what you need to know when it comes to the money market vs. CD debate.

What is a money market account?

A money market account is a savings deposit that earns interest at a rate that can be changed at any time after the account is opened. This savings account allows unlimited deposits and may permit a limited number of transfers including check writing capabilities within an established time frame (e.g. per month or statement cycle). It may also allow account access through an ATM or debit card. 

First Republic offers both Money Market Savings, for those who want the benefit of attractive interest rates, and Money Market Checking accounts, for convenience of accessing funds via limited check writing or ATM Card while earning interest.

To decide if a money market account is right for you, here’s a look at some of its pros and cons.  

Pros and Cons of a Money Market Account


  • Liquidity: Withdrawals may be made at any time. 
  • Overdraft protection: Automatic transfers can be established to provide overdraft protection for your checking (while your other funds continue to earn competitive rates).
  • Competitive rates: In general, the rate is higher than interest checking accounts. Some banks pay interest based on the balance in the account. The higher the balance the higher is the rate.
  • Access to ATM cards: In some cases, banks or credit unions will give you an ATM card to access funds from your money market account.
  • Money is insured: Funds in money market accounts are insured up to $250,000, per depositor, per financial institution, by the Federal Deposit Insurance Corporation (FDIC).


  • Limit on transfers: Number of transfers, including check writing as applicable, per month or statement cycle may be limited. Any excess may be subject to a fee.
  • Variable rates: Rates are variable, meaning they can change at any time after the account is opened depending on the current rate environment and market conditions.
  • Balance requirements: You may be required to open the account with a high minimum deposit and/or maintain a minimum balance of the account to earn interest or to avoid monthly service fees.

What is a Certificate of Deposit (CD)?

A Certificate of Deposit (most commonly referred to as CD) is a time deposit account. When you open a CD, your money is locked up for a specific term of your choice, anywhere from at least seven days to several years, depending on the terms offered by your financial institution. In exchange, your financial institution pays a fixed rate to guarantee the interest amount you will receive at the end of the term (the maturity date). In general, longer-term CDs pay higher interest rates.

The main draw is that a CD earns a fixed interest for the term of the account regardless of the current rate environment — so you don’t have to worry about the rate fluctuation. In general, CD rates are higher than the rates for savings and money market accounts because you cannot make withdrawals before the account matures.

During the term of the CD, there are no rate fluctuations; that means you’ll know exactly how much your account will earn by the end of its term. The downside is that if you need to access the money before maturity, you’ll have to pay a significant penalty for early withdrawal. 

In short, CDs are a secure way to save money, and earn interest on the principal in the account with predictable returns. 

Here’s a more detailed breakdown of the pros and cons of CDs to help you decide if it’s a good move for you.

Pros and Cons of a CD


  • Competitive rates: Depending on the type of account, a CD can yield a higher interest rate than other traditional savings accounts.
  • Money is insured: Funds in CD accounts are insured up to $250,000, per depositor, per financial institution, by the FDIC.
  • Predictable returns: In contrast with other investment vehicles, CDs offer predictable, guaranteed returns on the funds you put in. You set aside a specific amount at a fixed rate for a set amount of time, and you don’t have to worry about performance.


  • Early withdrawal penalty: The money in a CD must stay locked up for a set period and can only be withdrawn at maturity; otherwise, you’ll incur a significant early withdrawal penalty.
  • Renewals: Your bank will inform you when your CD term is about to mature, with the exception of 30-day CDs or shorter. But, if you somehow miss taking action at maturity, your account may automatically renew the same term. This means that you cannot make withdrawals without penalty, make any additional deposits, or change to a new term. At First Republic, clients can set up CD maturity reminders through online or mobile banking.

What is the difference between a money market and a CD?

Both money market accounts and CDs earn interest on the balances in the accounts, but the account features are distinct.

A money market account gives you transactional flexibility by allowing you to make deposits at any time. If you need immediate access to your funds you may make unlimited withdrawals at an ATM or in person at a branch of the financial institution. Outside of these channels, you may also make a limited number of transfers (including check writing) within the span of one month. Because of the accessibility of these accounts, the rates for these type of savings are variable and not as attractive as the rates on CDs.

When you open a CD, you agree to leave the money in the account for a specific time frame, called the term. The last day of the term is the maturity date. The interest rate during that term is fixed, making your return predictable, whereas the money market interest rates fluctuate at any time. Another key difference is that the CD account is not transactional. Additional deposits or withdrawals can only be made at maturity and you'll need to pay a penalty for withdrawing the funds early. 

Now that you know the difference between money market and CD accounts, it’s time to think about which one will best serve your financial needs. 

Which is right for me?

When deciding which savings method to go with, think about the benefits of each type and consider which one best aligns with your needs. For example, CDs are a great fit for anyone who is looking for fixed interest rates that will increase returns on money that they don't need in the near future, whereas money markets provide more access to the funds and some transaction capabilities. 

Once you’ve weighed the benefits of a money market vs. a CD, put them into context with your current financial needs.

Are you comfortable with setting aside money for a period of time to allow it to grow? If so, a CD is probably best for you. But if you prefer to have immediate access to your savings for unforeseen circumstances or needs, then go with a money market account.

Of course, there’s always a third option: You can split up your savings between a money market and a CD account so you can reap the benefits of both.

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