When to use a money market account over a certificate of deposit
In planning to invest money, there are a variety of ways that you can make your money grow. Two of the most popular accounts that people go for would be a money market account and certificate of deposit. There is a great difference between the two. It would depend on the investor’s needs to determine which of these can help them on managing their money well.
A certificate of deposit is a type of investment that banks and credit unions offer. If you have a big amount of money and you want to make it grow without risking it through business, you can purchase a certificate of deposit for it. The certificate of deposit will ensure your money will be kept for a period of time and will grow with the interest rate that you were given at the time of the sale. It depends whether you want the banks to keep it for a short or long period of time. You can also choose whether to have a fixed or variable rate on it. While the money is earning interest, you are not allowed to withdraw it before its maturity expires. This will cause you to be charged fees. A good thing about this feature is that it prevents you from being tempted to spend your money whenever latest items are on sale. It actually protects you from yourself when it comes to unnecessary expenditures. A disadvantage though would be the fact that you cannot use it for emergency purposes. If need be, you will have to be charged for it. After the maturity ends, you will get the original amount plus the earned interest. So, if you have good patience, you can invest your money on a certificate of deposit.
A money market account on the other hand works a lot like a savings account but its main difference is that it gives a higher interest rate. The reason for this is because when you put your money in the bank using a money market account, they use the money as capital for secured investments that can give them profit in a shorter period of time so in return, they give a higher yield rate on your account. You can withdraw the money and can even link a debit card which you can use on your daily expenses. It also enables you to write checks so the money is very accessible. The pronounced disadvantage though is that you will not feel that the amount is growing since you are able to deduct from it anytime you want.
If you really want to feel the growth, you can use certificate of deposit. However, if you want to use a money market account, you just have to restrain yourself from spending and withdrawing too much.
