High-Yield Savings vs. CDs vs. Money Market Accounts

The most expensive confusion in this subject is between two products whose names differ by one word.

A money market account is a bank or credit union deposit. The Consumer Financial Protection Bureau describes it as a type of account offered by banks and credit unions, insured by the FDIC or NCUA up to 250,000 dollars per owner.

A money market fund is a mutual fund. The Securities and Exchange Commission states the consequence without hedging: money invested in a money market fund, like money invested in any mutual fund, is not guaranteed by the FDIC. The CFPB adds that a money market mutual fund account is considered an investment and is not a savings or checking account, and warns that some firms have similar names and could be related to banks and credit unions.

Both are reasonable places to keep money. They carry different guarantees, and the difference is invisible in the name.

The products, compared

The insurance trap, worked through

People assume the 250,000 dollar limit applies per account. It does not. It applies per depositor, per insured bank, per ownership category, and federal regulation is explicit that deposits held in the same right and capacity are added together.

So consider someone consolidating their savings at one bank, all in their own name:

Five separate accounts, five different products, one insurance bucket. Product type is irrelevant; the ownership category is what separates coverage. Different categories, such as single accounts, joint accounts and certain retirement accounts, are insured separately from one another, which is the legitimate way to extend coverage at one institution. Opening a fourth CD is not.

Credit unions work the same way. The National Credit Union Share Insurance Fund covers 250,000 dollars, and confirms that a time deposit such as a share certificate is a covered product.

What they actually pay

The FDIC publishes national average deposit rates monthly. For September 2026:

Two things to notice. The money market account pays nearly double the savings average, which is the clearest case for the product. And the CD curve peaks at twelve months and falls after it, so locking money for five years at the national average pays less than locking it for one.

These are deposit-weighted averages across every insured institution, which means large branch banks paying close to nothing drag them down hard. They are a benchmark, not a ceiling. If your bank is paying you something near 0.37 percent, that is a fact about your bank rather than about the market.

The comparison trick nobody explains

Treasury bills are the obvious alternative, and comparing them to a bank account requires one step most people skip.

Treasury publishes bill rates two ways. On 22 September 2026, the 13-week bill showed a bank discount rate of 4.01 percent and a coupon equivalent of 4.11 percent. The 4-week bill was 3.82 and 3.88; the 26-week was 4.15 and 4.30.

Use the coupon equivalent when comparing against a bank APY. The bank discount rate is calculated on a different basis and is not comparable. Compare 4.11 percent against a 0.63 percent money market account and the gap is not subtle.

That comparison is against the national average deposit account, not against the best available. Competitive banks and credit unions pay far more than the average. But if your money is sitting in an ordinary branch account, a Treasury bill is currently paying several times as much for comparable safety.

“High-yield” is not a regulated term

Regulation DD, which implements the Truth in Savings Act, defines annual percentage yield and interest rate precisely. It defines no term such as high-yield, premium or high-interest. No federal rule sets a rate a bank must pay before it may use those words.

What is regulated is the APY itself, which must be calculated and disclosed on a uniform basis. That is why the APY is the only number worth comparing between institutions, and the adjective in front of the account name is marketing.

The six-withdrawal rule is gone, mostly

Savings and money market accounts used to be limited to six convenient transfers a month by federal regulation. The Federal Reserve removed that limit in an interim final rule in April 2020, and has said it does not plan to reimpose it.

The important nuance: the rule permits institutions to stop enforcing the limit; it does not require them to. Regulation D also neither requires nor prohibits fees for excess transfers. Plenty of banks kept their own limits and their own fees, which remain enforceable under your account agreement. The federal rule is gone. Your bank’s rule may not be.

If you buy a fund instead

Money market funds are worth understanding rather than avoiding, but know what you are holding.

The SEC distinguishes government funds, which invest at least 99.5 percent of assets in government securities, cash and repurchase agreements; tax-exempt funds, at least 80 percent in municipal securities; and prime funds, primarily in short-term corporate and bank debt. Retail and government funds may maintain a stable one dollar share price. Institutional prime and institutional tax-exempt funds must use a floating value.

Breaking the buck means the share value deviates by more than half a cent from one dollar. It is rare and it has happened: the Reserve Primary Fund held 785 million dollars of Lehman Brothers securities, Lehman filed for bankruptcy on 15 September 2008, and the fund broke the buck the following day. The SEC subsequently charged its operators with fraud.

The rules were tightened after later stress. In July 2023 the SEC adopted reforms, effective that October, that removed the ability to suspend redemptions through gates, raised minimum daily liquid assets from 10 to 25 percent and weekly liquid assets from 30 to 50 percent, and introduced a mandatory liquidity fee for institutional prime and institutional tax-exempt funds when daily net redemptions exceed 5 percent of net assets. The gates being gone is the change that matters most to an ordinary holder, since being unable to withdraw at all was the sharpest historical risk.

The penalty that makes a CD a different kind of product

The reason a certificate pays more than a savings account is that you have surrendered access, and the surrender has teeth.

There is a federal floor on the penalty and no federal ceiling. Regulation D requires a time deposit to carry an early withdrawal penalty of at least seven days simple interest on amounts withdrawn within the first six days after deposit. The Office of the Comptroller of the Currency states the consumer-facing version plainly: federal law sets a minimum penalty on early withdrawals from CDs, but there is no maximum penalty.

A penalty of six months of interest on a five-year certificate is entirely lawful. On a low-rate certificate broken early, a penalty can exceed the interest earned and eat into the principal you deposited.

Regulation DD requires the bank to disclose all of this before you open the account: the maturity date, a statement that a penalty will or may be imposed, how it is calculated and the conditions for assessing it, and whether the account renews automatically at maturity including any grace period. That last item is the one that quietly costs people money, because an automatically renewing certificate can roll you into another full term at a rate you never agreed to.

The practical rule: money you might genuinely need does not belong in a certificate at any rate. The extra yield over a money market account at national averages is around one percentage point, which on 10,000 dollars is roughly 100 dollars a year. That is not worth a penalty, and it is certainly not worth being unable to reach your own money in an emergency.

Tax

The IRS treats interest on bank accounts, money market accounts and certificates of deposit as ordinary income, reportable in the year credited. A 1099-INT is issued at 10 dollars of interest.

Treasury obligations are different, and this is where the real advantage often sits. Interest on Treasury bills, notes and bonds is subject to federal income tax but exempt from all state and local income taxes, under a statutory exemption in Title 31 of the United States Code. For a saver in a high-tax state, that exemption can be worth more than a modest difference in headline yield. A Treasury money market fund’s state exemption depends on its actual holdings, and some states impose a minimum-percentage threshold, so it is worth checking rather than assuming.

Which one, and when

1. Money you might need this week: a savings or money market account at an institution that actually pays competitively. The money market account pays more on average and usually offers cheques or a card.
2. Money you will not need for a defined period: a certificate matched to that period, with the caveat that the current national curve peaks at twelve months, so longer is not automatically better.
3. Larger balances: check your total across every account at one bank against the 250,000 dollar limit, counting product types together.
4. Money in a high-tax state: compare Treasury bills at the coupon equivalent, not the discount rate, and weigh the state tax exemption.
5. Compare APYs, never adjectives. High-yield means nothing in law.
6. Check whether your bank kept its own withdrawal limit, because the federal one has been gone since 2020 and many institutions never told their customers.

The unglamorous conclusion is that the product choice matters far less than where you hold it. Moving money from a 0.37 percent branch savings account to almost anything competitive is worth more than every distinction in this article combined, and the reason so many people do not is that the accounts paying the national average are the ones attached to the branch they have banked at for twenty years.

Where these figures come from

• Federal Deposit Insurance Corporation, National Rates and Rate Caps, September 2026, and 12 CFR 330
• National Credit Union Administration, share insurance coverage guidance
• Consumer Financial Protection Bureau, What is a money market account?
• Securities and Exchange Commission, Money Market Funds Investor Bulletin, November 2024; Money Market Fund Reforms adopting release, July 2023; press release on the Reserve Primary Fund, May 2009
• Board of Governors of the Federal Reserve System, Regulation D interim final rule, April 2020, and savings deposits FAQ
• Truth in Savings Act and Regulation DD, 12 CFR 1030.2
• US Department of the Treasury, Daily Treasury Bill Rates, September 2026
• Internal Revenue Service, Topic No. 403, Interest Received; 31 United States Code section 3124

General information, current as of September 2026, and not personalised financial advice. Deposit rates and Treasury yields move constantly; check the primary sources before acting on anything with money attached.