Money Market Account and CD's Defined
During hard economic times, it is best to save as much money as possible. One reason is that if you concentrate on saving, you will be able to prevent yourself from spending too much. Another advantage of putting your money in the bank is that you are able to earn a passive interest income. This means that you earn income without doing anything.
This is possible through the interest that you earn from the money you have deposited. Thus, if you are serious about saving money and earning a passive income through bank deposits, you must consider many important factors. The first thing that you have to consider if you plan on saving your money in the bank to earn passive income is to study the prevailing money market rates or the certificate of deposit rates.
A money market account is an account that yields interest and also allows the depositer to withdraw funds with short notice or no notice at all. Every bank that offers an account of this type has its own rates and terms and conditions. It is advisable to choose the money market rate that does not only offer high interest rates but also has reasonable terms and conditions that are suitable to your needs and prevailing circumstances.
A CD, on the other hand, is a deposit that yields a higher interest rates compared to a money market account. In return for the higher rate, there are more restrictions in the time and frequency of withdrawing the funds deposited. This is why a CD is also known as a time deposit. The philosophy behind a certificate of deposit is that the depositor earns a higher yield as compared to other interest rates because the depositor is prevented from withdrawing the funds that he or she deposited within the agreed duration of time.
The two important factors that you should consider in making a choice between a money market or a CD are the interest rates and the terms. If you get a high interest rate, it does not necessarily mean that it is the best deal. It is wise to make sure you are loaning the money to the bank for the right amount of time and won't need the money sooner. If you were to get a great interest rate but then have to incur penalties because you needed the money sooner than you though, it would defeat the whole purpose of making the investment. - 23159
This is possible through the interest that you earn from the money you have deposited. Thus, if you are serious about saving money and earning a passive income through bank deposits, you must consider many important factors. The first thing that you have to consider if you plan on saving your money in the bank to earn passive income is to study the prevailing money market rates or the certificate of deposit rates.
A money market account is an account that yields interest and also allows the depositer to withdraw funds with short notice or no notice at all. Every bank that offers an account of this type has its own rates and terms and conditions. It is advisable to choose the money market rate that does not only offer high interest rates but also has reasonable terms and conditions that are suitable to your needs and prevailing circumstances.
A CD, on the other hand, is a deposit that yields a higher interest rates compared to a money market account. In return for the higher rate, there are more restrictions in the time and frequency of withdrawing the funds deposited. This is why a CD is also known as a time deposit. The philosophy behind a certificate of deposit is that the depositor earns a higher yield as compared to other interest rates because the depositor is prevented from withdrawing the funds that he or she deposited within the agreed duration of time.
The two important factors that you should consider in making a choice between a money market or a CD are the interest rates and the terms. If you get a high interest rate, it does not necessarily mean that it is the best deal. It is wise to make sure you are loaning the money to the bank for the right amount of time and won't need the money sooner. If you were to get a great interest rate but then have to incur penalties because you needed the money sooner than you though, it would defeat the whole purpose of making the investment. - 23159
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posted by X - Men @ 1:51 AM
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