Certificates vs. Money Market Accounts: Which Is Right for You?

If you’re looking to tuck away some savings but aren’t sure what the difference is between a share certificate vs. a money market account, then keep reading! In this blog, we’ll explain and compare these high-yield savings accounts so that you can determine which one is best for you.

The Basics: What is a High-Yield Savings Account?

A high-yield savings account is one that earns interest—also known as dividends—at a higher rate than a basic savings account. When you deposit money into a high-yield savings account, the credit union adds interest to it for as long as you have the account open.

What is a Share Certificate?

Also referred to as a certificate of deposit, a share certificate typically pays a higher dividend than most high-yield savings accounts and offers the most options for deposit amounts and terms.

Pros and Cons of Share Certificates

There are many benefits to Oxford FCU share certificates, such as:

  • Higher interest rates than regular savings accounts
  • A choice of fixed-term rates ranging from 3 months to 5 years
  • Automatic renewal upon maturity
  • Option to transfer funds to other Oxford FCU accounts
  • Can be used as collateral for Share Secured Loans
  • Potential for accelerating the growth of your savings through compounding interest

While the benefits are many, there are also drawbacks to share certificates, such as:

  • Inability to add extra funds to the account during the term
  • The funds are not available to you during the length of the term
  • An early withdrawal of funds will incur a hefty penalty fee

Therefore, you should be sure you can live without the money for the duration of the share certificate term.

What Is a Money Market Account?

A more flexible way to grow your savings is through a Money Market Account because they allow you to deposit and withdraw money during the term while offering attractive dividend rates.

Pros and Cons of Money Market Accounts

There are several benefits to Oxford FCU Money Market Accounts, including:

  • No monthly fees
  • Unlimited $50 minimum deposits
  • Three withdrawals are allowed per month with no penalty
  • Ability to write checks from the account
  • No early withdrawal penalties
  • Tiered rate structure allows for bigger balances to earn higher rates

But there are a few drawbacks to Money Markets, such as:

  • $2,500 minimum balance
  • Typically lower interest rates compared to share certificates

Certificate or Money Market: Which Is Best for You?

The answer depends on your long-term goals and current financial situation. Here’s a handy table that compares them side-by-side. 

ACCOUNT TYPE

MINIMUM BALANCE

TERM LENGTH

ACCESS

FEES

Share Certificate

$500 to $1,000 (depending on term length)

3 months to 5 years 

Not until the term ends

Early withdrawal penalty may apply

Money Market

$2,500

None

3 withdrawals a month with no fee

No monthly fees or early withdrawal penalties

 

When Is a Share Certificate the Better Choice?

The most important thing to keep in mind with share certificates is that you cannot access the funds during the term without incurring a penalty fee. Therefore, share certificates are best for people who know that they won’t need the money at all during the length of the term.  

Because these accounts earn some of the highest interest rates, they are ideal for long-term savings goals like putting aside money for retirement or stowing away cash for that anniversary trip you hope to take in two years. 

A share certificate would not be ideal as an emergency fund because emergencies are unexpected—so if you needed the money quickly, you’d have to pay the penalty fee for an early withdrawal.

When Is a Money Market the Better Choice?

While the dividends on money market accounts aren’t as high as share certificates, they offer more flexibility in terms of access to your funds. For example, you can make cash withdrawals and write checks—which you cannot do with share certificate accounts. 

This accessibility makes money markets a better choice for emergency funds because you can grow the account while still having quick access to the money.

Diversify Your Portfolio With Both

One way to protect your investments is to diversify your portfolio, which means you spread out your investments instead of putting all your money into one type. If you have the ability, you could diversify by investing in both share certificates and money market accounts. 

Another important benefit is that these accounts are federally insured by the NCUA for up to $250,000 per account, with an additional $250,000 of coverage available through Excess Share Insurance (ESI).