A useful overview of money market versus savings account
Understanding the concept of CD is vital to beginning an analysis of money market versus savings account. The CD (certificate of deposit) system offers an attractive option for interested investors. CDs work by making investments in the money market. Both accounts are different, but not entirely different either. Traditional savings accounts and money market accounts are designed to help people save and grow their money safely. ‘Safely’ means that they do have to worry about losing their hard-earned money in a high risk environment. Though the fundamental aim of both is the same, there are some essential differences between the two.
Money market accounts often give higher interests for the same capital investment. Simply put, this means that for say $1,000 USD, you will get more interest from a money market account than from a traditional savings account. Certificates of deposit (CD) are issued to the client; indicating his investment in a money market account. The best part about CD is that you can choose varying durations of deposit and amounts for a transaction. Of course, the higher the basic value and the longer the duration, the higher will be the returns. The catch here is that there is a penalty involved for premature withdrawal. You CAN withdraw it in an emergency, but have to forfeit a penalty. What you make on a CD depends to a large extent on the prevailing money market trends and the state of the American economy at the time. If you buy a CD at a low price and the interest accrued on it has shot up, you have a chance to make a big bundle quite easily!
Traditionally, savings accounts offer less interest rates, but offer more flexibility. They function as a kind of medium between money market accounts and checking accounts. The increased amount of liquidity still makes them a favorite with a lot of people. Access to your money is easier. Savings accounts have now broken bounds and evolved. Banks are offering more innovative forms of savings accounts. You can have a savings account linked with your debit card. You may also have online savings accounts which are so flexible to use. The rate of interest offered to you often varies from bank to bank with significant disparity. Banks are working to offer appealing rates of interests to clients. Online access has enabled banks to reduce service charges on savings accounts.
To conclude the money market versus savings account analysis, it is fair to say that banks are committed to their clients. Their aim is to offer the best possible rate of interest within the economic framework available at the time. If you are thinking of investing in a CD or in a savings account, get familiar with them first. Examine the rate offered by different banks by going online. If you have a tidy sum that you would not need to access urgently, a CD is a good option to consider.