Can someone help me by telling me what's the difference between a CD account and a Money Market Account?

Question

I'm about to enter college in 2 months and I need some basic information on these two things as to what they are, what the differences are, if any, and which would be a better investment, if not both. Thanks!

Answer 1

Certificate of Deposit. Short- or medium-term, interest-bearing, FDIC-insured debt instrument offered by banks and savings and loans. CDs offer higher rates of return than most comparable investments, in exchange for tying up invested money for the duration of the certificate's maturity. Money removed before maturity is subject to a penalty. CDs are low risk, low return investments, and are also known as "time deposits", because the account holder has agreed to keep the money in the account for a specified amount of time, anywhere from three months to six years.

A savings account which shares some of the characteristics of a money market fund. Like other savings accounts, money market accounts are insured by the Federal government. Money market accounts offer many of the same services as checking accounts although transactions may be somewhat more limited. These accounts are usually managed by banks or brokerages, and can be a convenient place to store money that is to be used for upcoming investments or has been received from the sale of recent investments. They are very safe and highly liquid investments, but offer a lower interest rate than most other investments.

Hope this helps!

Answer 2

CD..certificate of depreciation...your moneys are lock up, the fees are high, returns are low.

Money Mkt...your money can stay liquid, little fees,if any returns can be 4.5% to 6%

Look at the return, subtract the fees,= your true return

$100@10%=$10return-2%fee=$8

If your saving for long term? for get both of those and look at Mutual Funds to build an IRA or ROTH-IRA

Read Investing for Dummies

Answer 3

A cd is usually set at a fixed rate and you must leave the money in it for a specified amount of time (6 months/1 year/etc) If you try and take it out you will have some high penalties). A money market is basically a high interest savings account. You are usually allowed 6 withdrawls within a statement period and are not penalized for them. This would be the way to go if you think you might need to access the money.

Answer 4

A CD stands for Certificate of Deposit. It could also be known as a time deposit because you get locked in at a certain interest rate for a certain time frame. The catch is you have to keep your money in the account for a certain amount of time to avoid a penalty.

e.g. You put $10,000 in a 3% 9 month CD and an emergency comes up in month 8, you would be penalized on the interest that you earned. If you would like to keep your money liquid(available), this isn't the product for you. It might require a minimum opening deposit. (The previous bank I worked in required $500)

A Money market account is a fancy way of saying savings account. These are your bank savings accounts were you have a certain interest rate that isn't fixed, so it could change whenever rates change. They are liquid and a lot of them do not require a minimum deposit.

Both of them are FDIC insured bank accounts, so they are safe.

I would encourage you to look at a third option which are ONLINE ACCOUNTS. They pay the rates that a CD would pay, but are liquid like a money market. If you would like to see competitive rates you coulld go to bankrate.com.