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mans hand holding a magnifying glass directed toward 3 blue and orange piggy banks. Diamond design highlights the piggy banks. money market vs. high-yield savings vs. share certificate

Money Market vs. High-Yield Savings vs. Share Certificates: Which is Beneficial to You?

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There are many different types of low-risk savings options available, and deciding which would work best for your situation can be confusing. Do you need short-term or long-term? How accessible do the funds need to be? What balance do you plan to keep in the account? You must also consider whether there are account maintenance fees, minimum balance requirements, or withdrawal limits. To help you make an informed decision on where to keep your money, below we explain a money market vs high-yield savings vs share certificate of deposit.

What is a Money Market Savings Account?

Money market accounts are a good option if you want easy access to your money and would like to earn more interest than a traditional savings account offers. These accounts are low risk so you won’t lose money; however, there may be minimum balance requirements to avoid a monthly maintenance fee. 

A Diamond Credit Union money market account gives you the flexibility to withdraw funds easily through digital banking transfers, in-branch transactions, or check writing privileges. Plus, there is no limit to how many times a month you can withdraw, making the account very accessible. For added peace of mind, funds in a credit union money market account are federally insured up to $250,000 through NCUA.

What is a High-Yield Savings Account?

High-yield savings accounts are low-risk accounts that offer complete access to your money when you need it. Offering a higher interest rate than traditional savings accounts makes this a great option for emergency funds or short-term savings goals. 

In exchange for a higher interest rate, high-yield savings accounts may come with some drawbacks. Depending on the financial institution’s policies, there may be a limit to the number of withdrawals you can make each month. Also, the interest rates are variable and can change at any time, making it crucial to monitor these accounts against economic shifts like inflation.

What is a Share Certificate of Deposit?

Unlike the other two options, a share certificate of deposit requires the money to be held for a set period of time (term). The money deposited cannot be touched until the term ends, or you may face an early withdrawal penalty. Depending on the financial institution’s policy, this penalty may include some of your original principal deposit. 

Share certificates earn higher rates than traditional savings and money market accounts due to this term structure. At Diamond, our share certificate terms range from 45 days up to 10 years, making them attractive for both short- and long-term savings needs. When the term is up, you receive the original deposit plus all accumulated interest.

Which Account is Most Beneficial?

Everyone has a different savings goal, and the account you choose should reflect that. By comparing money market vs. high-yield savings vs. share certificates, you can choose the option that best matches your financial priorities.

As someone who assists members with their financial needs every day, Diamond’s Pottstown branch Assistant Manager, Kaitlyn Jakavick, said, “Growing your savings starts with choosing an account that aligns with your goals, provides flexibility, and offers long-term peace of mind.”

Money Market vs. High-Yield Savings

Money market savings accounts and high-yield savings accounts have a lot of similarities, but they do have a few key differences that can impact your decision. Below is a  money market vs. high-yield savings account comparison.

  • Interest Rates
    • Money market and high-yield savings accounts offer a variable interest rate, meaning a rate can change at any time. Rates on a high-yield savings account are usually higher than or very similar to money market savings accounts. 
  • Account Access
    • Both accounts allow transfers and withdrawals. However, depending on the financial institution, money market accounts can also allow check writing and/or debit card options for more convenient access.
  • Withdrawal Limits
    • While the Federal Reserve has lifted the six-withdrawal limit on savings accounts in April 2020, some banks and credit unions still follow that rule. Check out each financial institution’s policies before deciding, as those who still enforce the rule internally may charge up to $20 per excess withdrawal.
  • Insurance
    • Both accounts are federally insured up to $250,000 by either the FDIC (for banks) or NCUA (for credit unions).
  • Minimum Balance and Monthly Fees
    • Each financial institution sets its own minimum balance requirements to earn the specified interest rate and to avoid monthly fees. While some institutions may not require a minimum amount to earn a specific interest rate, they require a certain amount to be kept in the account at all times to avoid a monthly fee.

Money Market and High-Yield Savings vs. Share Certificate of Deposit

Share certificates offer distinctive differences from a high-yield and money market savings account. 

  • Interest Rates
    • Unlike the money market and high-yield savings accounts, a share certificate offers a fixed rate that is locked in over the entire term. This guarantees your rate won’t change until the share certificate matures. 
  • Account Access
    • Once the share certificate is opened and funded, the money is tied up for the entire term. Accessing the money early may incur a penalty.
  • Withdrawal Limits
    • A share certificate does not have withdrawal limits since the only way to access the funds is to close the share certificate altogether and possibly incur a penalty.
  • Insurance
    • Just like the money market and high-yield savings accounts, share certificates are also federally insured up to $250,000 by either the FDIC (for banks) or NCUA (for credit unions).
  • Minimum Balance and Monthly Fees
    • Each financial institution offers various share certificate options depending on the deposit amount and the length of the term. Higher-rate share certificates typically require a larger minimum balance to open. Similarly, longer terms generally offer higher interest rates than short-term share certificates. These types of accounts do not have monthly fees; however, they may have early withdrawal penalties that may decrease the amount of interest you receive when closed.

Low-risk accounts vary, but one thing they all have in common is, if used as intended, you’ll never lose money. Even as the rates change, you know your money is safe and secure. 

Diamond offers a variety of accounts with varying rates to meet your needs. If you’re looking to open an account, or want to discuss your financial goals, schedule an appointment with one of our knowledgeable representatives today!

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