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What You Need To Know About Certificates of Deposit (CDs) and Money Market Accounts

a woman uses a piggy bank to symbolize the importance of CDS and money market accounts

For many of us, we know about savings accounts to help us keep our money safe for when we need it later. But when you see that teeny-tiny amount of interest accumulating year after year, you may wonder whether there are better options to help your money grow. And that’s where a certificate of deposit or a money market account could come in.

Learn more about certificates of deposit, money market accounts, and their pros and cons -- as well as what you need to know about using them in an inflationary environment.

What Is a Certificate of Deposit?
A Certificate of Deposit or CD is a type of savings account that holds a fixed amount of money for a fixed length of time. When you open a CD, you’re essentially setting your money aside until a later date, with the promise of receiving a certain interest rate in return.

With a CD, that later date is known as the “maturity date.” That means you have to leave your funds in the account until the CD is considered mature, which happens on a specified date. If you don’t, you’ll have to pay an early withdrawal penalty. In most cases, maturity dates for CDs are somewhere between three months and five years. The longer you leave your money in the account, the more interest you’ll be able to earn.

CDs may actually be able to earn you a higher interest rate than other types of savings. When you commit to leave your money in the CD for a specific period of time, you’re essentially allowing the bank the option to borrow your money during that time. So, you get higher interest rates, but you also have restricted access to your money.

A CD might be right for you if you want to earn some interest on your savings in a low-risk way. But they’re best when you don’t need immediate access to those funds.

Also, keep in mind that CDs generally have a minimum deposit or balance requirement, such as $500, so they’re not great if you’re looking to set aside an amount lower than that.

Pros and Cons of CDs

  • Interest rate: You may be able to earn a higher interest rate with CDs than with other types of savings accounts.
  • Low risk: You don’t have to worry about the volatility that comes with other investment options, such as the stock market. And CDs are FDIC-insured.
  • Guaranteed return: Your CD is guaranteed to return your money as well as any interest, as long as you leave your money in the CD until the maturity date.
  • Penalties: If you aren’t able to leave your money in the CD until the maturity date, you’ll face financial penalties for early withdrawal.
  • Lack of flexibility: In the case that you do need to withdraw your funds from a CD early, the money isn’t as readily available and accessible as it would be in a savings account, for example.
  • Interest rate: While the interest rate can be higher than with other types of savings accounts, it usually will not be as high as it could be with other types of investments.
What Is a Money Market Account?
A money market account is another type of savings account that can help you grow your investments. If you aren’t familiar with money market accounts, it can help to think of them as a type of combination between traditional savings accounts and checking accounts. For some people, money market accounts are the best option because they provide the best of both worlds.

Like savings accounts, money market accounts can earn interest. But one of the main benefits of a money market account is the fact that they often earn higher interest than traditional savings accounts. However, money market accounts often have higher balance requirements in order to earn that higher rate. Minimum balances are usually $1,000 or more.

Like a checking account, a money market account may give you the option to get an ATM card and/or checkbook. Which means you have easier access to your funds at any time.

Pros and Cons of Money Market Accounts

  • Flexibility: One of the main benefits of a money market account is how easy it is to access your funds through an ATM card and/or checkbook, meaning the money is there where and when you need it.
  • Interest rate: Money market accounts can help you earn a higher interest rate than a traditional savings account.
  • Low risk: As long as your money is held at an FDIC-insured financial institution, a money market account is a low-risk way to grow your money in the account.
  • Minimum balance requirement: With a typical minimum balance of $1,000, a money market account may not be an accessible option to all.
  • Potential fees: Some banks may charge monthly maintenance fees to customers using money market accounts. And some banks may charge fees if you make too many withdrawals in a month. Be sure you’re aware of the terms and conditions of a money market account before you sign up.
  • Interest rate: Although the interest rate is higher than with other types of savings accounts, the rate may not be as high as you like -- and it may depend on your account balance, meaning you’ll need to have even more money in the account to take advantage of the best rates.

Are CDs and Money Market Accounts Worth It During High Inflation?
Unfortunately, inflation is a topic that’s on everyone’s minds right now. During times like this, and other periods of high inflation, it’s easy to wonder whether a CD or a money market account is worth it.


Because, according to, the average five-year CD interest rate is 0.60% right now. But the inflation rate was up 8.6% year-over-year in May 2022, according to the latest data from Which makes it easy to wonder whether putting your money into a CD or money market account is actually causing you to lose money -- or at least purchasing power.

However, in the right personal circumstances, CDs and money market accounts can still be the right choice. Keep in mind that these types of accounts generally aren’t meant to help you gain extreme amounts of wealth. They’re intended to help you preserve the wealth you already have.

And ultimately, they’re meant to help you make a little bit extra in interest on your money that might otherwise be collecting dust in a traditional savings account.

Academy Bank Has CD and Money Market Account Options for You
At Academy Bank, we’re working hard to be your go-to bank for all your financial needs. And we are proud to offer both CDs and money market accounts with competitive interest rates.

Learn more about all the types of savings options we offer.

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