MMA, CD, savings or cash reserve?

As of this writing, the most profitable account available is a 9-month CD provided by NASA Federal Credit Union, which offers 5.65% APY. The best high-yield savings and money market accounts also offer rates above 5.00%, while the best cash reserve account among those we surveyed is Robinhood’s Gold Account, with an APY of 4.65%.

That doesn’t mean all investors should rush to put their money in a CD just because it tops the chart, though. There are important distinctions between these accounts that may make some a better choice for you given your financial plans and needs.

Cash reserve accounts can simplify financial transactions

Although brokerage cash management accounts have the lowest yield of the account types listed above, some investors may find these accounts among the easiest to monitor. If you already have an account with a brokerage that offers a competitive rate on a cash reserve account, the process of moving your money to cash reserves can be very simple. On the other hand, if you don’t have a brokerage account yet, you might prefer another option that offers a higher return.

Robinhood Gold subscribers currently receive the best return among cash reserve accounts at 4.65% APY, but also pay a $5 per month fee. Only a handful of brokerages offer similar interest rates on cash management accounts, including Wealthfront’s cash management account, which pays 4.55%, and Betterment’s, which pays 4.55%. 50%.

CDs allow you to lock in a competitive rate

One of the main advantages of CDs is that they allow savers to benefit from a high interest rate, guaranteeing returns at this level for the duration of the certificate. CDs also allow the flexibility of a variety of durations, ranging from a few months to several years. On the other hand, many banks and credit unions will charge high penalty fees to depositors who withdraw money from a CD before the end of the term, so these accounts tend to be best for people who are comfortable leaving their money untouched for a long time. time.

The best CD rates today range from 4.77% APY for a 5-year CD to 5.65% APY for a 9-month CD from NASA Federal Credit Union. Regardless of the term, the highest paying CDs offer considerably higher interest rates than the national average, so it’s always best to confirm that the rate you’re getting is competitive.

High Yield Savings Accounts Smash National Average Rate

The national average interest rate for savings accounts is a paltry 0.40%, largely thanks to large national banks who can offer low interest rates because they don’t need to incentivize. investors to provide deposit cash that can be returned and loaned out. The best high-yield savings accounts offer a rate more than 10 times higher than the national average.

Savings accounts offer flexibility that CDs do not. You can withdraw your money or deposit more as you see fit. Most high-yield savings accounts offer transfers between institutions that take just a few days, meaning most savers find their funds easily accessible. However, savings account rates change frequently and without warning, often in line with changes in the federal funds rate. A high interest rate therefore offers no protection against a significant drop in yield later.

Money market accounts offer the flexibility of savings, but with checking

Money market accounts have become largely interchangeable with savings accounts, the main difference being that they allow account holders to issue checks, unlike traditional savings accounts. Both types of accounts are suitable for savers who expect to withdraw or deposit money repeatedly. However, like savings accounts, MMAs can change rates at any time, exposing savers to the risk of a sudden drop in interest rates.

The national average interest rate for money market accounts is 0.59%, well below the highest paying MMA rate of 5.25% APY at Brilliant Bank. A total of 10 MMA are currently paying 4.50% APY or better.

Disclosure of rate collection methodology

Each business day, Investopedia tracks rate data from more than 200 banks and credit unions that offer money markets, savings accounts and CDs to customers nationwide, and determines the daily ranking of the most remunerative. To be eligible for our listings, the institution must be federally insured (FDIC for banks, NCUA for credit unions) and the account’s minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g. you don’t live in a certain area or do not hold a certain type of employment), we exclude credit unions with a donation requirement of $40 or more. To learn more about how we choose the best rates, read our full methodology.