Money Market or Certificate Account?

So, you’ve got a chunk of money that you’re not using right now—maybe it’s an inheritance from your Uncle Herman, a healthy birthday haul, yearly bonus or proceeds from selling your dirt bike. What are you going to do with it? Sure, you could stash it under your mattress or hold it in a savings account, but there are better options!

The wise financial choice would be to put it in an account that earns dividends until you decide how to use it. But, what kind of account is best? Consider a money market account or certificate account. Both will grow your money similarly—but they have a few subtle differences.

Both types of accounts:

• Are low-risk, dividend-earning investments




• Earn more than traditional savings accounts




• Are federally insured by NCUA

The differences:

• Certificate accounts mature after a certain period—usually anywhere from 6 to 60 months—whereas money market accounts can be accessed anytime.




• Because you are giving up access to your money with a certificate account, you typically earn dividends at a higher rate than with money market accounts.




• If you need to access your certificate account prior to the maturity date, there will likely be an early withdrawal fee. Money markets don’t charge this fee as you can access the money whenever you need it.




• Once your money goes into a certificate, the idea is to let it grow and not touch it. With a money market account, you can use it like any other account—write checks, access ATMs, make online money transfers and pay bills online.




• Starting balances and minimum balances differ among financial institutions. At Mountain America Credit Union, both the starting and minimum balances for a money market are $2,500, while a certificate may be started with as little as $5.

Before you take your newfound wealth and add it to your regular checking or savings account for safekeeping, evaluate how and when you’ll need it. Take the opportunity to let that money grow in a money market or certificate account instead—it’s a solid money management decision that results in a bigger balance for you!