High-Yield Savings vs Money Market vs CDs: Where Should Your Cash Go?

Cash sitting in a traditional checking or savings account often earns close to nothing. Moving it to the right place can earn you meaningfully more with very little extra risk. The tricky part is that several options sound alike. Here is how they actually compare.

The quick comparison

High-yield savings accounts (HYSA)

A high-yield savings account is a regular savings account that pays a higher interest rate, usually from an online bank with lower overhead. Deposits at FDIC-insured banks are protected up to $250,000 per depositor, per insured bank, for each account ownership category. Credit unions have the same coverage through the NCUA.

• Pros: safe, easy, no lock-up, often no minimum balance.
• Cons: the rate is variable and usually falls when the Federal Reserve cuts rates.

An HYSA is the default home for an emergency fund.

Money market accounts (MMA)

A money market account is a bank deposit account, insured like a savings account, that may come with checks or a debit card. Rates are often similar to HYSAs, though some require a higher minimum balance to earn the top rate.

Certificates of deposit (CDs)

A CD locks your money for a set term, commonly from 3 months to 5 years, in exchange for a fixed rate. CDs are insured like other bank deposits.

• Pros: the rate can't drop during the term, which is great if you expect rates to fall.
• Cons: early withdrawal usually costs a penalty, often several months of interest.

CD ladder: instead of one big CD, split the money into several CDs that mature at different times (for example 6, 12, 18 and 24 months). Something matures regularly, so you keep access while locking in rates.

There are also no-penalty CDs, which let you withdraw early without a fee, usually at a slightly lower rate.

Treasury bills

T-bills are short-term U.S. government debt with maturities of up to one year. You can buy them at TreasuryDirect.gov or through a brokerage account. A key perk: interest on Treasuries is exempt from state and local income tax, which can make them more attractive than a bank account with a similar rate if you live in a high-tax state.

How interest is taxed

Interest from savings accounts, money market accounts and CDs is taxed as ordinary income at the federal and state level. Your bank sends a Form 1099-INT if you earn $10 or more in a year. To compare options fairly, look at the APY (annual percentage yield), which includes compounding, and think about state taxes for Treasuries.

Which one should you choose?

• Emergency fund: high-yield savings or money market account.
• Saving for a purchase 1–3 years away (a car, a wedding, a down payment): CDs, a CD ladder or Treasury bills that mature before you need the money.
• Cash waiting to be invested in a brokerage account: a money market fund or T-bills.
• Long-term goals, 5+ years: cash usually isn't the best tool. See how to start investing.

Checklist before you open an account

1. Confirm the bank is FDIC-insured (use the FDIC's BankFind tool) or the credit union is NCUA-insured.
2. Compare APYs, and check whether the rate is promotional or requires a minimum balance.
3. Look for monthly fees and transfer limits.
4. Check how fast transfers to your checking account arrive.

Rates change frequently, so we don't list specific rates in this guide. Compare current APYs directly with banks before opening an account.