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What are the Differences Between a Money Market Account and a CD?


Adequate savings are critical to healthy finances. Not everyone knows that there are options outside of piggy banks and regular checking and savings accounts to save and build your money. Some popular alternatives that are offered by Sunflower Bank are Money Market and Certificate of Deposit (CD) accounts. Let’s take a look at what each option has to offer and how they differ. 

What is a Money Market Account?

In simple terms, think of a money market account (MMA) as a type of savings account. You earn interest on money markets according to current interest rates. The interest rates on MMAs are often better than those of regular interest-bearing checking or savings accounts.

Note that there is typically a higher balance requirement to open and maintain an MMA than with a traditional savings account. Additionally, there could also be a monthly maintenance fee.

What is a CD?

CD stands for Certificate of Deposit—a time deposit account with a fixed interest rate and a fixed date of withdrawal. When you open a CD, you agree to leave your money in the bank for a set length of time (known as a term). The interest it collects is called the Annual Percentage Yield (APY). Our bank offers a wide range of fixed terms—from 30 days all the way up to 5 years or more. Just like with the money market account, there is a minimum amount required to open a CD, with higher dollar amounts typically earning higher interest rates.

Accessibility is Key

MMAs and CDs have similarities: They are both very safe—federally insured by the FDIC for up to $250,000. They both require minimum balances to open. Both earn interest.

The main difference between the two is the accessibility of funds. Money market accounts allow you to withdraw funds when needed, but by law you are limited to only 6 transfers or withdrawals per month or statement cycle. On the other hand, CDs completely restrict access to the money. Your funds must remain in the account until the CD matures. If an event occurs where you make a necessary decision to withdraw the funds before the maturity date, you can, but you will be charged a penalty for early withdrawal.

MMAs and CDs are just a couple of the ways we’re Creating Possibility for our clients. Our friendly personal bankers would love to show you options for these and other accounts that meet your individual needs. From time to time we often may run a special promotion rate for MMAs or CDs. Make sure to contact a banker about our current offers or visit a location today.

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