Either Way, It’s Easy to Save With Ally Bank

Deciding where to put your savings often comes down to a money market account or a certificate of deposit (CD). The money market vs. CD comparison isn’t as simple as it once was. Deposits in each type of account are insured by the Federal Deposit Insurance Corp. (FDIC) to the maximum allowed by law when you choose an FDIC-member bank such as Ally Bank. And both accounts are generally easy to manage. But there are still some important distinctions that make them appropriate for different strategies.

Adding to Your Account on a Regular Basis
It’s no secret that steady deposits are one of the best ways to accumulate savings. And with money market accounts you can add money on a regular basis.
CDs, on the other hand, generally don’t give you the option to make regular deposits. You typically make one opening deposit and earn interest on that until the CD matures—unless you make an early withdrawal, which will typically require you to pay an early withdrawal penalty.

Access to Your Funds
With CDs, you usually agree to leave your funds in the account for a given period of time. Typically, longer terms mean higher interest rates. And since an early withdrawal penalty is nearly always a condition of ownership, it pays to know what that penalty is before you open the CD. With a money market account, you don’t have to worry about an early withdrawal penalty when you access your funds. You just need to stay within federal withdrawal and transfer limits.

Are CD APYs Always Better?
Not long ago, it nearly always made sense to choose a CD over a money market account for short-term savings goal. Interest rates on CDs were usually considerably higher than money market accounts, making it something of a no-brainer. But in today’s market, rates may be more closely aligned than in the past. When you’re shopping for CDs and comparing APYs, make sure you ask:

  • What is the APY and how is interest compounded?
  • When does the CD mature? What is the early withdrawal penalty?
  • Will the CD automatically renew at maturity if I don’t withdraw the money? If so, how will that be handled?

Money Market vs. CD: The Bottom Line
Some people like the rigidity of a CD because it discourages them from the occasional temptation to dip into their savings. A CD also gives you a sort of built-in organizational tool. For example, if you know you’ll want to make a car down payment in one year, you can open a one-year CD and know you have that money saved. But if you know you’re going to need to add to your account on a regular basis, and you may need regular access to your funds, a money market account is probably a better choice.

The bottom line is that the decision depends on your own financial goals. It may make sense to open both, each account for different purposes. Either way, Ally Bank is here to help. Find out more at Ally.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.

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