$12,000 CD vs. $12,000 high-yield savings vs. $12,000 money market account: Here's which will earn the most now
While it may feel good to deposit a big, round number in a high-rate savings account right now, the reality is that doing so isn't always that easy, especially in today's economy. With inflation surging last month, a paused Federal funds rate continuing to make it costly to borrow and stock market swings significant now, savers will understandably want to maintain access to a portion of their funds. And that can be hard with fixed-rate accounts like certificates of deposit (CDs).
At the same time, many savers do have a portion of their funds that they can put into a CD, high-yield savings or money market account. And while that may not be $20,000 or $30,000, even a smaller number like $12,000 can be worth depositing into one of these accounts now, especially if it means a sizable return and some protection against market volatility. But the interest rate each account offers, while comparable, won't be identical. So it's helpful to start by crunching the returns each offers. Below, we'll do the math.
See how much interest you could be earning with a CD account here.
$12,000 CD vs. $12,000 high-yield savings vs. $12,000 money market account: Here's which will earn the most now
Calculating the interest-earning potential of a high-yield savings or money market account can be difficult to do with accuracy, as both accounts have variable rates that will change based on current market conditions. The CD rate, however, will be fixed, allowing savers to determine their exact interest earnings.
Here's how much each will earn in the remaining months of the year on the assumption that the variable rates hold steady and that no penalties are levied against any account:
- $12,000 3-month CD at 3.90%: $115.33
- $12,000 high-yield savings account at 4.03% after three months: $119.11
- $12,000 money market account at 4.00% after three months: $118.24
- Most profitable account: The high-yield savings account
- $12,000 6-month CD at 4.10%: $243.53
- $12,000 high-yield savings account at 4.03% after six months: $239.41
- $12,000 money market account at 4.00% after six months: $237.65
- Most profitable account: The 6-month CD
- $12,000 9-month CD at 4.05%: $362.69
- $12,000 high-yield savings account at 4.03% after nine months: $360.90
- $12,000 money market account at 4.00% after nine months: $358.23
- Most profitable account: The 9-month CD
While the CD will be most profitable in two of these three scenarios (though the 9-month account will technically mature in January), it's important that savers look past these minor interest-earning differentials. The CD rate will also be locked and not well positioned to rise, should current market conditions continue and rates increase in the months ahead. That won't be an issue with the variable rate high-yield savings and money market accounts, however.
At the same time, should rates reverse course and decline again, the above returns will decline, too, while the CD earnings will hold steady. Consider all three account types closely, then, before getting started, and explore the benefits of splitting your money between two or even all three in today's unpredictable economy.
Explore your top savings account options online today.
The bottom line
Savers can earn between $115 and $360, approximately, with a $12,000 CD, high-yield savings or money market account if they act now. And while these returns won't make them rich, they're still exponentially better than what they're likely already earning with a traditional savings account (at an average rate of just 0.39%). And, with a CD in particular, they'll be guaranteed thanks to the account's fixed interest rate. Explore all three carefully. These may not have the same appeal as accounts in larger, rounder numbers, but they can still be effective and lucrative accounts to consider in today's uncertain economic terrain.
