Money Market vs. No Penalty CDs: How to Choose

When you’re trying to decide on a savings account, you’ve got plenty of options. A money market account includes many of the same features and perks as a no penalty certificate of deposit. But they’re not the same product.

How do you know which to pick? To choose the right one for you, you might think about what you need from your savings product.

Do you need a workhorse – an account you can build upon and access easily that still offers a strong interest rate? Or do you have long-term goals that make a less flexible account with a higher interest rate a better option?

Money Market Accounts
An Ally Bank Money Market account is a good option for the first scenario. It requires no minimum opening deposit, charges no monthly maintenance fees, offers daily compounded interest and the option to withdraw at any time.

One reason to open a money market account is ease of access. You can withdraw your money online or by phone, and you can fund your account with new deposits. (Certain withdrawals and transfers are limited to six per statement cycle.) You can write checks from money market accounts. Best of all, you can also access your money with a Visa® Debit Card.

The Ally Bank Money Market account offers a 0.84% interest rate (as of February 21, 2012) – one of the highest offered in the industry.

Certificates of Deposit
For more long-term savings, you might consider an Ally Bank No Penalty CD, which requires no minimum opening deposit, charges no monthly maintenance fees, offers daily compounded interest and the option to withdraw at any time (after the first six days following the date the account was funded).

Unlike a money market account, with a CD you only make one deposit (when you open your account), and one withdrawal (when you close it). But an Ally No Penalty CD offers a higher interest rate: 0.91% for an 11-month term (as of February 21, 2012).

Of course, depending on what you need from your funds, there are other great savings options. To look at all Ally savings accounts, check our online comparison.

What advice would you offer someone trying to choose between a money market account and a no-penalty CD?
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  1. 3

    It would be nice to be able to do online transfers from my Ally checking account to my Ally IRA CD, but that is not an option. Are there plans to implement this? It seems strange for an online bank to require a paper form!

    • 4

      We’re always looking to improve user experience and feedback like yours will help with that process, Tom. Thanks for your feedback.

  2. 7

    Between the two accounts depends on how much someone wants to access. CD’s are much more higher in interest but that money stays in. For the No Penalty, someone can withdrawal at anytime, but it has to be the whole amount, not partial. Money Market can be an account for partial withdrawal and more use and access to money. Just depends if someone wants more interest, or more access.

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