With the increase in interest rates over the last year, now is a great time to learn about Certificate of Deposit (CD) and Money Market accounts — two savings tools that may be a good fit to help you reach your financial goals. These types of accounts are appealing because you can save money for a specified period of time while earning a return on your investment with virtually no risk. Let’s dive in to better understand the details about each type of account and determine which account is more attractive to personal or business consumers.
What is the difference between a CD and a Money Market?
CDs – This type of account is like a termed savings account. Your funds are deposited for the term, or the period of time, you want to invest. Funds earn a set rate of interest for that period of time. Terms range from seven days to five years, with many options in between. Deposits or withdrawals are generally not allowed with the exception of your interest earned on the account. As interest accrues, it can be added to your CD or you may choose to transfer the interest into your checking or savings account. First Mid’s CDs pay competitive rates with flexible terms, whether you are interested in short-, mid-, or long-term savings.
Money Markets – This type of account is like a savings account with check-writing privileges and debit card access. You can make unlimited in-person or ATM withdrawals, but are restricted to a limited number of check or electronic transactions from the account. Money markets earn a variable rate of interest based on the daily periodic rate and the principal in the account each day. Rates are set periodically and may change at any time.
What are the benefits of each account?
CDs – Most financial institutions won’t let you add additional funds to a CD account once you open the account. However, First Mid allows you add up to add up to $50,000 to a CD before it matures.
Money Markets – In addition to having access to your funds, including unlimited ATM access, the rate of interest paid is based on the account balance. The higher your balance, the higher your rate of interest. Interest is compounded and credited to your account monthly. For maximum benefits, interest begins to accrue on the business day you deposit non-cash items, such as checks.
Are CDs and Money Markets insured?
When established through a bank that is a member of the FDIC, CDs and Money Markets are insured up to the allowable FDIC limit. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. If you have deposits larger than $250,000, you can maximize your FDIC coverage by having accounts with different ownership categories, or you can have deposits at multiple financial institutions. However, First Mid eliminates the headaches of working with multiple banks by offering deposits through ICS® & CDARS®.
What are the restrictions for each?
CDs – CDs typically require a minimum investment of $1,000 with maturity terms ranging from seven days to five years. You cannot touch your money until the account matures, otherwise you will incur a penalty and forfeit interest earned if you withdraw or close the account before the maturity date.
Money Markets – The minimum initial deposit for both personal and business accounts is $1,000. There is a $5 maintenance fee charged if your daily minimum balance falls below $1,000 during a statement cycle.
Interested in learning more? Visit your nearest First Mid banking center today to open one of these accounts to help you safely grow your money.
