Choosing the right type of savings account can be confusing. Are you better off with a certificate of deposit (CD)? A traditional savings account? A money market account (MMA)? In some ways, these three types of savings accounts are similar.

They're all taxable accounts you can open at a bank or credit union, and are protected by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). Each account has pros and cons, and the right choice will be different depending on how much money you have and your personal needs.

Comparison: Average Features of Accounts for Saving
	Savings Accounts	Money Market Accounts	Certificates of Deposit
Average interest rates	Lower	Higher	Highest
Rate type	Variable	Variable	Fixed
FDIC or NCUA insured for up to $250,000	Yes	Yes	Yes
On-demand partial or full deposits and withdrawals	Yes	Yes	No
Check-writing privileges	No	Yes	No

Savings Accounts

These simple accounts are one of the most basic ways to bank your money. A savings account is a good choice for a young person’s first bank account or anyone needing easy cash access.

Most banks don’t require a large deposit to open a savings account. Often, $25 is sufficient. You may need to keep a minimum balance in the account to avoid a monthly fee, ranging from $25 to $1,000, depending on the bank and the account. You may be given an ATM card to make withdrawals but could also be limited in how often you can use the card, and must be careful not to go below the minimum balance required.

If your savings and checking accounts are with the same bank, you'll likely be able to quickly transfer money between the accounts or use your savings account for overdraft protection. A linked savings account makes moving cash from savings to checking especially easy. However, some banks and credit unions may charge a fee for such a transfer.

On average, you usually won’t earn that much interest—savings account rates are lower, on average, compared to most other savings vehicles.

However, some exceptions exist. A high-yield savings account (HYSA) usually offers significantly higher interest rates. These are typically at online-only banks and offer some of the best savings account rates that beat even money market account rates. There are no federal restrictions on how many accounts or banks you store your money in.

Who Savings Accounts Are Good for

• Students and children beginning their relationship with a bank
• Anyone who wants unfettered access to their cash without penalty
• Savers who worry a money market account's check-writing feature may be too tempting

Money Market Accounts (MMAs)

Banks and credit unions also offer another type of savings account, the money market account (MMA). MMAs are similar to traditional savings accounts but offer higher interest rates, on average.

However, there can be a few catches. You may also need a larger deposit to open the account—$1,000 is common—and maintain a higher balance to avoid fees.

A money market account can require a higher deposit amount to earn a higher interest rate. Unlike traditional savings accounts, which pay a flat annual interest rate, many MMAs have a tiered interest rate, with higher rates for larger balances. This makes them desirable if you can maintain a high daily account balance.

MMAs also offer the ability to write checks from the account or use an ATM card for withdrawals and payments. However, because the institution may limit your transactions and withdrawals, a money market account isn't as suitable for daily expenses as a checking account. Money market accounts differ widely—you'll need to closely review terms and account disclosures. The MMA offered by your credit union or bank may not offer tiered savings, minimum balances, or monthly fees.

Who MMAs Are Good for

• Individuals with large amounts of cash to deposit
• People who want the ability to write checks from their money market account
• Individuals who want to save emergency funds in an account earning higher interest, on average

Certificates of Deposit (CDs)

When opening a certificate of deposit (CD) account, you allow the bank to use a lump sum of your money for a fixed period—as short as a month or as long as ten years, as you choose. At the maturity date, you can withdraw your funds and close the account or renew the CD at current rates.

CD interest rates can be higher than for traditional savings accounts or MMAs. CDs can therefore be desirable for savers making large deposits without needing access to the money during the CD’s term. CDs are FDIC-or NCUA-insured for up to $250,000.

However, there's a trade-off. You will face a steep fine for early withdrawals, typically several months' interest. You usually can't add to your CD, although some banks and credit unions offer CDs with this option. While many institutions offer CDs with a $0 opening balance, the best CD rates can often be found with institutions requiring larger deposits, ranging from $500 to $10,000. As with MMAs, higher balances on CDs tend to offer higher rates. CDs generally have fixed interest rates, which could leave you stuck at a lower interest rate if overall rates keep increasing.

The particular bank and term length you choose can significantly impact your interest rate. Shop around to find the top CD rates, which change frequently.

Who CDs Are Good for

• Individuals who don't need access to any portion of funds for several months to several years
• Those who don't want to add to their savings bucket over time
• Larger (or jumbo) CDs often get higher interest rates, so individuals with a larger deposit amount will see a better return

The Bottom Line

When deciding if a traditional savings account, MMA, or CD is best for you, you’ll need to consider how much you can deposit initially, how frequently you need access to your savings, and how much you’d like to earn in interest. Due to competition among some financial institutions for deposits, you may find higher rates in surprising places—whether as a CD, high-yield savings account, or money market account—and not necessarily at your current bank or credit union. If you need money for bills or emergencies or want to add to your funds, a traditional savings account or MMA is the best choice. If you can afford to leave a larger sum of money untouched for a long stretch of time, a CD may be the better option.