Importance of Certificate of Deposit (CD) & Money Market Accounts

Definitions

Money market accounts and certificates of deposit (CDs) are two types of financial products that can help you grow and manage your savings. Both of these options provide a wonderful way for you to earn interest on deposited funds while maintaining a relatively low level of risk.

Firstly, let's understand what money market accounts and CDs are. A money market account is a type of savings account that typically offers higher interest rates than traditional savings accounts. This is normally because money market accounts require a higher minimum balance and often have limits on the number of withdrawals or transfers per month. Now CDs, on the other hand, are time deposit accounts that require you to deposit a specific amount of money for a fixed period of time, ranging from a few months to several years. In exchange, you can receive a higher interest rate than you would on a traditional savings account.

This is where the concept of making your money work for you comes into play. Instead of having your funds in a savings account earning only a little bit of interest, you can put that money in a CD or money market account and have your money make you more money! Love that!

Why should you care?

One of the primary benefits of money market accounts and CDs is the ability to earn a higher interest rate than traditional savings accounts. This is really important interest rates are low, where it can be difficult to find safe and reliable ways to grow your savings. With a money market account or CD, you have the ability to earn a higher return on your deposited funds without taking on excessive risk. That’s a Win-Win scenario folks!

Not only do money market accounts and CDs give you better interest rates, they can also provide a great sense of security and stability. Unlike stocks or other types of investments, money market accounts and CDs are insured by the FDIC by up to $250,000 per depositor per account! This means that your money is always protected! So stinkin cool.

Another advantage of CDs is their predictability. Because interest rates are fixed for the the term, you know EXACTLY how much you’ll earn on your deposited funds. This can make it super easy to plan and budget for future expenses and financial goals. This is one of my favorite attributes as it really helps with budgeting, which y’all know is one of my favorite topics!

Little more info…

It's also important to note that both money market accounts and CDs typically have some restrictions or penalties if you withdraw your money before the term is up. For example, a CD may charge a penalty fee if you withdraw your money before the end of the term. I will mention that these restrictions are in place for your benefit. It encourage individuals to keep funds deposited for the full term so you get the most benefit out of the investment made.

So… now that we’ve learned a little bit about Money market accounts and CDs, what do you think? I truly believe both of these tools are wonderful for people looking to grow and manage their savings. By offering higher interest rates, security, AND predictability, these two financial products provide a safe and reliable way to earn a higher rate of return on your funds.

If you’re looking for a low-risk way to earn a higher return on your savings, a CD or money market account may be the financial tool for you. Give one of our Guaranty Bank & Trust personal bankers a call if you have any questions or want to find out more. You can also open a CD or Money Market online. They’d be delighted to help you!