Should I get a Money Market Account or Certificate of Deposit?

Question

I live in Canada and currently have $2000 that I dont need for the next 2 years. Should I open a MMA and put this money in there or getting a CD instead? And also with which bank?

I wont touch this money at all for the next 2 years so Im looking for the BEST way to earn the best interest with this money.

Thx

Answer 1

If you are SURE you don't need it for 2 years then the question is whether or not you can get a higher rate with the CD.  If you can, that's the way to go.  But right now it seems to me that the rates are pretty similar when you look at online banks and I think that's where you'll get your highest return.  

For example, INGDirect.com is offering 3.00% on savings but 3.80% on a 2-year CD (okay that's fairly different in that you'd make an extra $32.13 over 2 years by getting the CD).  ETrade.com is offering 3.30% on its Complete Savings account and 3.35% on a CD (so extremely close here).  Both of these are reputable companies so I feel safe investing with them and they are FDIC backed.  FDIC insurance appears to cover foreigners btw.  

You can also check rates at bankrate.com.  It seems that WaMu is offering 4.00% online!  If you go with WaMu CD, you'll have $2163.20 in 2 years (2000 x 1.04 x 1.04).  Finally, with WaMu, you can get 4.25% for 13 months but then you don't know what rates will be when you roll it over.

Glad you are saving!  We need to do more of that in the US.

Answer 2

always go with Money Market when you can, check your local credit union for the best rates.

Answer 3

A money market account's rate will fluctuate based on actual banking rates.  A CD is fixed for the length of the term.

A CD should be at a higher interest rate also, but you lose the instant liquidity.

So the question is, do you want a fixed or variable rate and do you worry about needing it case of emergency prior to the two year time period.  You've got to pick what is best for you.

Go talk with someone at your bank and ask about the rates, they should also be able to compute what the earnings amount to for the investment period.

Answer 4

If you are sure you don't need the money, a CD would be good, make sure you check the rates on different time periods of the CD because it is not always the longest terms that get the best rates.  Also some CD's require more than $2,000 to start so check that too.