3 Unexpected Advantages of Money Market Accounts Over CDs

Perhaps no deposit account has had such a massive resurgence over the last year as certificates of deposit (CDs). It's not hard to understand why. The best CD rates are still hovering around 5.5%, with a variety of promotional terms to choose from. Even no-penalty CDs, which typically don't have favorable rates, are ranking high on the best-of charts, with several products on the financial platform Raisin paying out above 5%.

Regardless of their superb annual percentage yields (APYs), CDs aren't right for everyone, especially not for those who need flexible access to money. Thankfully, you don't need a CD to take advantage of today's high interest rates. In fact, for some people, a money market account might be the better option. Here's why.

1. Competitive rates

Yes, gasp. Many of today's best money market accounts have APYs that are on par with the best CDs.

Of course, you'll find many, many more CDs with competitive rates than money market accounts. Plus, CDs lock in those rates for the length of their term, while money market accounts don't offer such guarantees. But if you don't want a CD, it's good to know a money market account can still offer you a great rate of return.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of January 6, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of January 6, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

2. Easier access to funds

Money market accounts make it easy to withdraw money. For one, they often come with check-writing privileges, which allows you to pay for purchases directly with checks. Many also let you link a debit card to your account, giving you another way to access your savings account. This easy access to money is why money market accounts are often compared to checking accounts.

In contrast, CDs don't have the luxury of partial withdrawals. To access your money, you'll need to liquidate your account, which also involves paying an early withdrawal penalty. While some no-penalty CDs don't levy the fee for withdrawing money, you'll still need to withdraw all your money and close your account.

3. No early withdrawal penalties

Money market accounts don't charge fees or penalties for withdrawing funds. While some do have restrictions on how many withdrawals you can make each month, you still have greater control over your savings.

Of course, this is the main problem with CDs. Unlike money market accounts, you will pay a penalty to access money in your CD account. The penalty depends on your term, but often it's equal to several months' interest. For example, a 1-year CD may impose a penalty worth 90 days of interest, while a 3-year CD could charge a penalty worth 12 months of interest.

What's worse is that this penalty is imposed even if you haven't earned enough interest to cover it. For instance, let's say you deposit $10,000 into a 6-month CD with a 5.5% APY and an early withdrawal penalty worth three months of interest. In this case, the penalty is worth $137.50. After a month, your CD has earned $45.83, but you decide to break your contract. You'll still pay $137.50, which means the CD provider will take about $91.67 from your original $10,000. You just lost money on a safe bank product designed to help you earn!

Which is better for your investment in 2024?

For all of their advantages over CDs, money market accounts have one major weakness: They won't freeze today's high interest rates. Instead, they have variable APYs, which can fluctuate as market conditions change.

That's why, if you have a longer time horizon, you might be better off getting a CD in 2024. Sure, you won't have easy access to your money. But in exchange for flexibility, you can lock in a high APY for a longer period. Even depositing some money in a CD can go a long way in helping you maximize your earnings, especially since high APYs might not be here much longer.