How to Choose Between a Time Deposit or Money Market Account
Are you trying to decide between a Time Deposit (also known as a CD) and a money market account (MMA)?
A Time Deposit will require you to lock your money up for the entire term until the maturity date is reached. With a money market account, there’s no need to lock your money away until a set date.
Both options will bring you the benefits of long-term savings. Let’s dive into their main differences and help you determine which is best for your personal finances.
Differences Between a Time Deposit and MMA
Time Deposits and money market accounts offer great opportunities for investments. Both offer higher interest rates to accrue funds. Additionally, both options are customer oriented and not dependent on the stock market.
Money Market Account
A money market account is similar to a savings account but with a higher interest rate contingent on your account’s balance. Basically, the more you save the more you make in interest. Interest is earned on a monthly basis.
Money market accounts tend to be more flexible since this type of account is not set up for a specific length of time. Account owners are not locked into a MMA and can get out of one without paying a penalty.
Money market accounts have a certain amount of withdrawals you can make, which can be done via checks or debit cards.
On the other hand, a Time Deposit differs from the money market account by having a set term. When you open a Time Deposit, you will agree to a set length of time by establishing a maturity date. This frame of time can range from anywhere between 91 days up to 5 years.
A Time Deposit is a traditional approach to saving money and can offer account owners a sense of security about their investments. An early withdrawal is possible, but there is a financial penalty involved.
The account owner chooses the rate of interest (known as Annual Percentage Yield) and the term (or length) of the Time Deposit, and the earned interest is either compounded or paid out annually. Most Time Deposits retain their initial interest rate throughout the life of the deposit.
Which Account Is Right for You?
A money market account tends to be more accessible than a Time Deposit. This is because there isn’t a set time to deposit or withdraw the funds.
Money market accounts are great for those who want to save money at a higher interest rate, while enjoying the flexibility of access to their funds for any unexpected expenses. There is no monetary penalty for early withdrawal, although the earning potential could be adversely affected by a lower account balance.
Benefits of Money Market Account:
- Withdrawals can be done via a free debit card or ATM
- No financial penalty for early withdrawals of six or less debit transactions per month*
- Flexible length of time
- Greater rate of interest-bearing
- Monthly statement monitoring
A Time Deposit account requires a set amount of time before the withdrawal on the maturity date. Some people chose a Time Deposit because they enjoy the constraints of a Time Deposit to save money with more control.
Benefits of Time Deposit Account:
- Fixed-date withdrawal (maturity rate)
- Fixed-rate earnings greater than savings account
- Guaranteed returns
- Secure and dependable
Traditional and High Yield Money Market Accounts
Security First offers two types of money market accounts for those who wish to enjoy the benefits of higher interest, while having the flexibility to access their money.
All you need to get started is:
- $100 minimum deposit to open
- $2,500 minimum balance** or a $5,000 minimum balance*** to avoid maintenance fees
Both our Traditional and High Yield Money Market Accounts come with free debit cards, free ATM use****, online banking, and more.
Open a Money Market Account at a Security First Bank Branch by You!
Both a Time Deposit and money market account offer great potential earnings for future savings. At Security First Bank, we can help you kick off the process of applying for a money market account. We offer traditional and high yield money market accounts.
Our team of personal bankers are here to help you get started. Reach out to us with any questions or to set up your account!
*A $5 activity fee will apply for each debit transaction over six per month. Debit transactions are defined as transfers from Money Market or High Yield Money Market Checking to another checking account or to third parties by check, preauthorized, automatic or telephone transfer.
**$8 monthly maintenance fee is waived if a $2,500 minimum balance is maintained every day of the statement cycle. If your account is subject to a monthly maintenance fee, you may reduce it by changing the type of statement you receive. You will receive a $2 credit per month if you choose to go paperless with an online statement.
***$15 monthly maintenance fee is waived if a $5,000 minimum balance is maintained every day of the statement cycle. If your account is subject to a monthly maintenance fee, you may reduce it by changing the type of statement you receive. You will receive a $2 credit per month if you choose to go paperless with an online statement.
****Applies to Security First customers using Security First-owned ATMs. Fees may be charged when using ATMs not owned by Security First.