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Money Market vs. Certificate: Which One Is Better?

access_time Posted on: May 30th, 2023

Money markets and certificate accounts both offer safe places to stash your excess cash while earning interest, but which is the right choice for you? We take a look at how money market vs. certificate accounts work and which is best for different kinds of savers.

Smart Saving Choices: Money Market vs. Certificate

If you’re looking to start putting money aside from your monthly budget, then both money market accounts and certificate accounts offer safe places to start building a nest egg for retirement, college, a wedding, or a down payment on a car. While both offer great launchpads for your savings, there are important differences in how they work.

Money market accounts and certificate accounts offer different advantages and drawbacks depending on your plans for your money, how much you can contribute, your timeline, and your flexibility. Here we consider how each of these widely available savings products work and examine how each might meet your needs.

What Is a Money Market Account?

A money market account is a special kind of deposit account that offers a higher interest rate or Annual Percentage Yield (APY) on balances than most checking or savings accounts. Money market accounts offer some interest on your deposits while keeping money close at hand.

Unlike a certificate account, a money market account allows you convenient access to your funds. Some money market accounts require larger initial minimum deposits than a checking or savings account. Interest is generally higher than regular savings accounts, but will also fluctuate with market conditions.

Money markets are offered by almost all banks and credit unions, are easy to open, and can be linked to your savings and checking accounts. Some accounts even come with their own checking capabilities or a debit card to make accessing funds even easier.

Money market accounts through credit unions offer the same security guarantees as checking and saving accounts since they are federally insured by the National Credit Union Administration (NCUA). 

What Is a Certificate Account?

A certificate account allows you to earn more interest by investing money for a predetermined period. Certificates are offered by most banks and credit unions and provide a no-risk return on your investment in money you do not currently need access to.

A certificate account lets you invest an amount for a period (or term) of between three months and five years. In return, you are paid interest at a fixed Annual Percentage Yield (APY), with dividends compounded and reinvested at predetermined intervals. The longer the term of your certificate account, the higher the APY you will be offered. 

Certificate accounts offered by credit unions are insured by the federal government up to a maximum of $250,000 per account. That means your money earns significantly higher interest than other types of deposit accounts, and also benefit from almost zero risk of losing your money. 

That said, unlike other types of deposit accounts, your money remains inaccessible for the full term of the certificate unless you pay a steep penalty to withdraw it. 

How Are Money Market and Certificates Different?

While both money market and certificate accounts are designed to help you save, they do so in different ways and with different results. Here are some key ways in which they differ:


The biggest and most significant difference between money market and certificate accounts is the ease with which you can access your money. Most money market accounts allow you to withdraw funds as needed, while most certificate accounts will charge a steep penalty if you access your money before the certificate’s term matures.

Interest Rates

Money market and certificate accounts differ in the interest rates they pay. Because money market accounts need to keep your money readily available, interest rates are typically similar to or only slightly higher than conventional savings accounts. This is because your bank or credit union cannot earn interest itself by lending this money out to others.

Certificate accounts require you to leave your money alone for longer. Therefore, because your bank or credit union knows it can lend that money with confidence, it is able to pay more interest which it shares with you as dividends. Generally speaking, the longer you can leave your money in a certificate account, the higher the interest rate you will earn.

Minimum Balances

The minimum balance required in both money market and certificate accounts varies widely depending on how each product is set up. That said, money market accounts usually require holders to deposit and maintain a smaller amount than most certificate accounts, although they might not pay interest on deposits below a certain level.

In general, you usually need to deposit larger amounts to open a certificate account, and once deposited, this amount is fixed. At the same time, you will earn interest on all the money in a deposit account and at a rate that is fixed for the full term of the certificate.

Penalties and Fees

Money market accounts are open-ended savings products designed to remain open indefinitely.  Depending on your institution’s policies, you could face penalties if you overdraw your account. 

By contrast, certificate accounts generally charge fewer fees. That said, your money remains unavailable to you for the term of the certificate, and penalties for withdrawing money early are usually pretty steep.

Which Account Is Right for You?

So, which product makes the most sense for your financial situation and savings goals? It really depends on if you are just starting to save or if you already have hundreds of dollars that you are ready to grow with a particular goal in mind.  

When to Choose a Money Market Account

Starting to save can be hard. If you’re just putting down roots in central Pennsylvania, housing costs are probably eating up much of your paycheck, and even the occasional family treat like a trip to the Farm Show is costing more. Plus, it’s hard to set money aside when you might need to cash it out to pay for the next unexpected expense. 

A money market account makes the most sense for savers who are willing to earn less interest in exchange for more flexibility and convenience. This includes savers who are only able to set aside a few dollars a month or who may need to access their money in a hurry.

For these savers, the accessibility and liquidity of a money market account make sense. While your money is clearly separate from the daily expenses you manage through your checking account, it’s easy to move in extra cash when you can spare it and withdraw some when you need it.

For example, Belco Community Credit Union’s Money Market Account requires just $250 to open and pays interest on all the money you deposit above this level. Interest is paid on a tiered basis, so you’ll earn a higher APY the more money you are able to save. This makes a Belco Money Market Account a great place to stash larger amounts of cash in the short term.

Money market accounts offer other services to make long-term saving easier, including payroll deductions and automatic transfers from other accounts. These features are not available with a “term” product like a certificate account.

When to Choose a Certificate Account

If you’ve done the hard work of scraping together enough savings to invest, you’re in a good place. It’s time to set your goals and a timeline to put your money away. You might have your eyes on a down payment on the car of your dreams, a springtime wedding, or be looking to turn your crafty side hustle into something more permanent.   

A certificate account makes sense when you have already saved a lump sum (even a small one), but you have a specific plan for your savings. While your money will be effectively out of reach for any period from a few months to several years, you will know up front exactly how much money you will be making and when your investment will be paid out.

Depending on how much you have to invest and for how long, a certificate account offers the chance to earn significant interest with absolute predictability and almost no risk. If you are saving for a clear goal and you can afford to be without your money for a fixed period, then a certificate account makes a lot of sense. 

Certificates also help to reinforce good saving habits by making it more difficult to access your cash. If you tend to miss savings goals because you end up using your savings for other discretionary expenses, then a certificate might provide the structure you need.

That said, many institutions are now offering more flexible certificate products that provide some access to funds even as they remain invested. Belco Community Credit Union, for example, now offers the option to have monthly dividends from its standard certificates:

  • Reinvested in the certificate 
  • Paid out by check
  • Deposited in your checking or savings account

This allows you to enjoy the security and benefits of a high-interest, longer-term certificate while still getting regular access to your dividends. Belco also offers three special certificates for more ways to boost the earnings you enjoy from a certificate deposit. These include: 

  • Add-On Certificate – allows one additional deposit during your term 
  • Bump-Up Certificate – allows you to increase your rate once during your term
  • Prime Rate Certificate – a variable rate certificate with a rate based on Wall Street Journal Prime Rate minus 3.25%

Belco also offers certificate-secured loans, which allow you to borrow money using your certificate account as collateral for the loan.

Believe in Better Saving With Belco

Belco has been serving the people of Adams, Cumberland, Dauphin, Lancaster, Lebanon, Perry, and York counties in central Pennsylvania since 1939 with innovative savings and loan products as well as unmatched personal service.  

Whether you’re saving money for the next stage of your financial journey or putting away money for retirement, a certificate account from Belco Community Credit Union is a great stepping stone to the future. 

Our standard certificate accounts offer:

  • Minimum deposit of $500 for most certificates
  • Terms from 3 to 60 months
  • Great rates locked in for the entire term
  • Dividends reinvested monthly or cashed out
  • Automatic renewals

We also offer our members higher rates on certificates with minimum investments of $10,000, $50,000, and $75,000 plus unique terms on limited special certificates. Contact us today to find a certificate product that matches your savings goals or click below to find out more.

See Our Certificate Accounts Options & Benefits

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