The main difference between a business money market vs CD lies in the ability to write checks and make withdrawals using a debit card. A business MMA has checking account features and may come with a debit card, whereas a CD has neither—it’s a time deposit account, something an MMA isn’t.
That means that an MMA offers more flexibility and liquidity with funds on deposit since you can make deposits and withdrawals at any time. However, a CD offers higher interest rates. Generally, the choice you make should be based on which of these objectives is the most important for the daily operations of your business.
If you’re looking for a great interest rate on a business MMA, U.S. Bank is a good option. Its Platinum Business Money Market pays up to 3.56% APY • This is a limited-time promotion that can be withdrawn at any time without prior notice.<br />• New accounts with balances between $50,000 and $2,999,999.99 can earn up to 3.56% APY.<br />• Accounts falling below the $10,000 minimum balance will be subject to a $15 maintenance fee per statement cycle. . CDs can run from 3.92% to 4.02% APY There are two CD options to choose from. <br />1. CD Special requires a minimum deposit of $1,000 and can earn up to 3.92% APY.<br />2. Jumbo CD requires a minimum balance of $250,000.01 and can earn up to 4.02% APY. <br /><br />Rates and terms are subject to change at any time without notice. based on the term and ZIP code of the depositing bank.
Interest Structure of a Business Money Market vs CD
The main difference between a business money market vs a CD regarding interest is the structure. MMAs use stacked tiers, whereas CDs use timed terms.
- An MMA’s lowest tier is based on lower deposit amounts. As the tiers get higher, the amount on deposit gets higher, and, generally, the interest rate gets higher. However, this is not absolute since every bank has the ability to set its own rates. Here is an example of how the tiers may be structured Each financial institution can set its tier structure independently. This structure is used by many banks today. .
Tier | Amount on Deposit |
|---|---|
1st | $1-$500 |
2nd | $501-$10,000 |
3rd | $10,001-$50,000 |
4th | $50,001-$100,000 |
5th | $100,001-$250,000 |
- A CD’s shortest timed term is three months and the longest is 10 years. The interest rate is fixed based on the length of time you agree to leave the funds on deposit untouched. Funds are unavailable for withdrawal until the CD matures, and early withdrawal will result in a substantial penalty with an interest loss calculated in.
Business MMAs vs Business CDs vs Business Savings Accounts
You will notice three different account types when searching for the best way to save business funds.
- Business MMAs
- Business CDs
- Business Savings Accounts
Each of these is interest-bearing. Many factors may be considered when deciding which is right for you, but some are monthly fees, access to cash on deposit, penalties for withdrawals, and interest rates.
The table below will compare the account types to help you decide which product will work best for your business needs.
Business Money Market Account | Business CD | Business Savings Account | |
|---|---|---|---|
Best For Business With | Large reserves they don’t need to access regularly | Very large reserves they won’t need to access for months or years | Smaller reserves they might need to access regularly |
Interest Rate Offered | Similar to, but usually higher than, savings; lower than CD | Highest of the three | Similar to, but usually lower than, money market; lower than CD |
Liquidity of Funds | Can withdraw funds anytime, subject to monthly transaction limits | Unable to withdraw money for a fixed period; early withdrawal penalties are very high | Can withdraw funds anytime, subject to monthly transaction limits |
Check Writing Capabilities | Yes | No | Usually no |
Relative Minimum Deposit | Highest of the three | Similar to money market, but higher than savings | Often the lowest |
Sample of U.S. Bank Business Money Market vs CD Overview
U.S. Bank will accept deposits larger than $250,000 on an MMA. Its tier structure will accommodate deposits up to $2,999,999.99 under the current promotion. Keep in mind the amount covered by the FDIC is limited to $250,000 even when depositing larger amounts to qualify for the interest bonus. The promotional rate is for a limited time only and can be withdrawn at any time.
When to Use a Business Money Market Account
A business MMA is the best option if you:
- Need to deposit and withdraw money from the account on a regular basis
- Need reserve funds available for large expenses
- Don’t mind earning a lower interest rate
Business MMA Pros & Cons
| PROS | CONS |
|---|---|
| Withdrawals can be made by check or debit card at any time | Rate is adjustable based on deposit totals and can be lowered at any time |
| Financial liquidity to access funds easily | Monthly maintenance fee will apply if the balance falls below the minimum |
| Low initial opening deposit | Number of withdrawals is limited per statement cycle |
When to Use a Business CD
A business CD is the better choice if you:
- Want to earn a higher interest rate and don’t need access to reserve funds
- Have alternate funds available in the event of an emergency
- Don’t mind paying a penalty to gain access to your CD funds if needed
Business CD Pros & Cons
| PROS | CONS |
|---|---|
| Rate is fixed for a certain term with a guaranteed interest deposit at maturity | Funds are unavailable for withdrawal without paying a substantial penalty during the CD term |
| Various terms to choose from | Financial liquidity is reduced |
| Higher rate of interest due to length of term commitment | Longer terms may not keep pace with inflation |
When to Consider Business CD & MMA Alternatives
Every business has a unique set of circumstances that must be considered when investing funds in a financial institution. There are times when a regular business savings or checking account is the better option.
You Have Smaller Reserves
Businesses with limited reserves will most likely need access to funds regularly without paying penalties. In this case, a traditional business account is a better option.
If you are searching for a traditional business savings account, our recommendation is Live Oak Bank, which leads our roundup of the best business savings accounts. It offers the following benefits:
- 3.70% APY as of 11/01/24
- No monthly maintenance fees
- No minimum balance requirements
- Online account opening in minutes
- North Carolina-based customer support
- Available to businesses nationwide
- QuickBooks integration
- FDIC insurance
For more information, read our Live Oak Bank business savings review.
You Need Constant Access to Funds With Unlimited Transactions
A business checking account that earns a higher interest rate could be a good choice for your business. This will make withdrawals worry-free without excess transaction fees.
We recommend Bluevine, one of our top small business checking accounts, for those seeking an interest-earning business checking account. It is largely a fee-free account that earns 1.5% APY on all qualifying balances up to $250,000.
Read our review of Bluevine business checking to learn about the account’s features.
Frequently Asked Questions (FAQs)
The choice will be based on your business needs. If you do not need access to your funds for an extended period and want to earn a higher interest rate, a CD is a good option. If you need more financial liquidity, with the freedom to make regular deposits and withdrawals with a lower rate of return, an MMA would be the better choice.
MMAs generally pay a lower rate of interest in comparison to business CDs. Also if you fall below the minimum daily balance, a penalty will be charged at the close of the monthly statement cycle.
Since CDs are considered timed deposits (deposits made into a CD are basically on a calendar timer), the funds are unavailable until the term is complete. This could be a certain number of months or years depending on the product selected. If funds need to be withdrawn before the CD matures, a high penalty is charged for breaking the terms of the deposit agreement.
CDs are insured by the FDIC as long as you follow the maximum deposit insurance guidelines. CD balances are covered up to $250,000 per depositor, per account.
Bottom Line
Both business MMAs and CDs prove to be good options to house excess funds and earn interest. Deciding which is best for you depends on the individual needs of your business. If you’re looking for unlimited access to your funds without paying penalties for withdrawals, a business MMA is a good choice. If your business has funds that will not be needed for an extended period, a CD would be better. Either provides a safe and secure place to deposit your hard-earned dollars.
