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by Pyrobee on October 19th, 2004

Pyrobee

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What are the advantages/disadvantages between a CD and a money-market account?

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  • by postmuffin on February 19th, 2006

    postmuffin

    A CD is usually purchased for a set amount of time - 12 months or 60 months or something like that. When the time is up, you can cash it in with the interest earned, or roll it over into another CD, probably at a different interest rate. CDs have a set interest rate for the life of the CD. If you cash it in early, then you lose some interest and may have to pay a penalty.
    A money market account is more like a checking account. You can add money to it, and can usually write checks on the account, but there is usually a limit to how many withdrawals or checks you can have in a month. The interest rate is not guaranteed and may fluctuate. You can close the account at any time without penalty.

    Advantages of a CD over a money market account is that you are guaranteed a certain return. Disadvantages would be that you don't have easy access to your money. That could be an advantage too if you are trying to save money, it will help you keep from touching it.

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