Last verified: October 2026. Deposit protection limits come from the FDIC, NCUA, the Bank of England, APRA and the European Commission. Interest rates are not quoted here because they change constantly. Rates in the examples are hypothetical.
A savings account is the most flexible, a money market deposit account is a similar bank account whose features and balance requirements vary by bank, and a certificate of deposit (CD) locks your money for a set term in return for a fixed rate. Which one fits depends on when you will need the money, how much penalty you could accept and how your balance compares with the deposit protection limit. All three are bank deposits in the US and are protected when held at an insured bank, up to the limit.
The product names are mostly American. The UK calls the equivalents easy-access accounts, cash ISAs and fixed-rate bonds, and Australia uses savings accounts and term deposits. This guide covers all of them.
Key takeaways
- Savings account: easy access, variable rate, best for an emergency fund and short-term goals.
- Money market deposit account (MMDA): a bank deposit account that works like a savings account, with features that vary by bank. Do not confuse it with a money market fund, which is an investment and is not covered by FDIC insurance.
- CD: a fixed term and rate. Withdrawing early means paying a penalty, so only use money you will not need until maturity.
- Safety: in the US, deposits at FDIC-insured banks are covered to at least $250,000 per bank, and NCUA coverage is $250,000 for federally insured credit unions. The UK limit is £120,000, Australia’s is $250,000 and the EU’s is €100,000.
- Interest is taxable in the US, and in the UK it depends on your income and allowances.
The three options compared
| Savings | Money market (MMDA) | CD | |
|---|---|---|---|
| Access | Withdraw when you need | Varies by bank | Locked until maturity |
| Rate | Variable | Variable, varies by bank | Fixed for the term |
| Early exit | Check account terms | Check account terms | Penalty fee |
| US cover | FDIC or NCUA | FDIC or NCUA | FDIC or NCUA |
| Best for | Emergency fund | Larger balance you may need | Money with a known date |
Savings account
A savings account lets you add and withdraw money, usually with a variable interest rate that the bank can change. It is the default place for an emergency fund. Our guide to budgeting methods explains how to set money aside in separate pots such as sinking funds.
Banks may limit how often you can withdraw. For decades US rules capped certain savings transfers at six per month, but on 24 April 2020 the Federal Reserve deleted that limit from Regulation D. Banks can still set their own limits, so check your account terms.
Money market deposit account
A money market deposit account, or MMDA, is offered by a bank and is a deposit account like a savings account. The SEC’s Investor.gov explains that money market depository accounts are offered by banks and guaranteed by the FDIC up to limits. Features such as check-writing, debit cards and minimum balances vary by bank, so read the terms.
Money market funds are different. They are mutual funds. Investor.gov says money invested in them is not guaranteed by the FDIC like bank accounts are, so there is a risk you may lose some or all of the money you invested. They are sometimes sold next to bank accounts, so check which one you are buying.
Certificate of deposit
The CFPB describes a CD as a type of savings account offered by banks and credit unions. You generally agree to leave the money in for a set time, and withdrawing early means paying a penalty. When you compare CDs, the CFPB suggests looking at three things: the term, the interest rate and the size of the early-withdrawal penalty. It also advises choosing a maturity date that matches when you expect to need the money.
Which one should you choose?
- Emergency fund and bills coming up soon: a savings account, because you can reach the money.
- Larger balance that you still want to access: an MMDA may suit you if its rate and features beat your savings account, so compare the terms.
- Money you will not need until a known date: a CD, if the rate is worth the lock-in and the penalty.
- A mix of both: split your money. Keep what you might need in savings and put the rest in CDs.
The CD ladder strategy
A CD ladder splits a sum across CDs with different maturity dates, so that part of the money becomes available regularly. The idea is to get some of the benefit of longer terms while still having access to cash each year.
This is a hypothetical illustration. The rates are assumed for the example and are not current or predicted rates.
Priya has $20,000 she will not need for several years. She puts $5,000 into each of four CDs:
- a 1-year CD at an assumed 3.0%
- a 2-year CD at an assumed 3.2%
- a 3-year CD at an assumed 3.4%
- a 4-year CD at an assumed 3.6%
In the first year, the interest is:
- $5,000 × 3.0% = $150
- $5,000 × 3.2% = $160
- $5,000 × 3.4% = $170
- $5,000 × 3.6% = $180
That totals $660. For comparison, $20,000 in a savings account at an assumed 2.5% would earn $500 in a year.
When the 1-year CD matures, Priya can use the $5,000 if she needs it, or reinvest it into a new 4-year CD. Repeating this each year means that after the first cycle, one CD matures every year. The savings account rate could rise or fall, and the CDs’ rates are fixed until maturity. That is the trade-off.
The drawbacks are worth knowing:
- Early withdrawal can mean paying a penalty.
- A fixed rate can end up lower than new rates if rates rise.
- A ladder takes tracking. Moneysmart warns that term deposits can roll over into a new term if you do nothing, possibly at a lower rate, so review them a month before maturity.
How safe is your money?
In the US, the FDIC says deposits are automatically insured to at least $250,000 at each FDIC-insured bank, and this covers checking, savings, money market deposit accounts and CDs. It does not cover mutual funds, stocks, bonds or crypto assets. Credit unions are covered separately by the NCUA at $250,000 per member-owner for single accounts, with joint accounts and IRAs covered separately. A few state-chartered credit unions use private insurance instead, so confirm yours is federally insured.
| Region | Scheme | Limit |
|---|---|---|
| US (banks) | FDIC | At least $250,000 per bank |
| US (credit unions) | NCUA | $250,000 per member-owner |
| UK | FSCS | £120,000 per person per firm |
| Australia | Financial Claims Scheme | $250,000 per holder per ADI |
| EU | Deposit guarantee schemes | €100,000 per depositor |
If your balance is above the limit at one bank, consider spreading it across insured institutions. You can check coverage with the FDIC’s tools.
Tax on interest
In the US, the IRS says interest on bank accounts, money market accounts and CDs is taxable income, and you must report all interest on your return even if you do not get a Form 1099-INT. Our guide to refunds and withholding explains how extra income can affect what you owe.
United Kingdom
The UK equivalents are easy-access savings accounts, cash ISAs and fixed-rate bonds.
- Protection: the Financial Services Compensation Scheme (FSCS) protects eligible deposits up to £120,000 per person per authorised bank, building society or credit union. It rose from £85,000 on 1 December 2025. Brands that share one banking licence share one limit.
- Cash ISAs: interest in an ISA is usually tax-free. The overall ISA limit is £20,000 in 2026 to 2027. From 6 April 2027, the cash ISA limit for under-65s falls to £12,000 within that overall limit, and stays at £20,000 for those aged 65 and over.
- Tax outside an ISA: GOV.UK says whether you pay tax on savings interest depends on how much you earn, your other taxable income and your allowances.
Our first-time buyer guide explains the Lifetime ISA, which has its own rules.
Australia
The equivalents are savings accounts and term deposits.
- Term deposits: Moneysmart says the money is locked away for the term you choose, usually between one month and five years, at a fixed rate. If you need the money early you may pay a penalty and may only get part of the interest, or none, and you may have to give notice of up to 31 days.
- Protection: the Financial Claims Scheme guarantees deposits up to $250,000 per account holder at each Australian-incorporated, APRA-authorised bank, building society or credit union. It covers savings accounts and term deposits but not foreign-currency deposits, and it only pays if the government activates it after an institution fails.
- Scams: Moneysmart warns about fake term deposits and “investments like a term deposit”, so check the provider is on APRA’s list.
European Union
EU rules require deposit guarantee schemes that protect deposits up to €100,000 per depositor, funded by banks. The names, fixed-term products and taxes on interest vary by country, so check your own country’s rules.
Common mistakes
- Locking in money you may need. CD penalties can wipe out gains.
- Confusing a money market fund with a money market account. Only the account is a bank deposit.
- Going over the protection limit. Check balances at each institution.
- Chasing the top rate without reading terms. Look at minimums, fees and how long the rate lasts.
- Letting a CD roll over unnoticed. It may renew at a different rate.
- Forgetting tax on interest. Report it on your return where required.
- Assuming every credit union is federally insured. Confirm with the NCUA.
- Ignoring inflation. A fixed rate does not protect purchasing power, so match the product to the goal.
Frequently asked questions
Is a money market account the same as a savings account?
They are similar, because both are bank deposit accounts. A money market deposit account may offer different features, such as check-writing, and different minimums. Compare the terms and rate.
Are CDs safe?
CDs at FDIC-insured banks are covered up to $250,000, and credit union CDs are covered by the NCUA up to $250,000, according to the CFPB. The main risk is the penalty if you withdraw early.
What happens if I withdraw from a CD early?
You generally pay a penalty fee, according to the CFPB. The amount varies, so check it before you buy.
Is a money market fund FDIC-insured?
No. It is an investment product and the SEC says you may lose some or all of the money you invested.
What is a CD ladder?
A CD ladder spreads your money across CDs with staggered maturities, so part of it becomes available at regular intervals.
What is the UK deposit protection limit?
The FSCS protects eligible deposits up to £120,000 per person per authorised firm from 1 December 2025.
This article is general education about savings products, not financial or tax advice. Rates, limits and rules change and your situation is your own. Check the official sources below, and consider talking to a qualified adviser before making decisions. See our Editorial Policy and Disclaimer pages for how we work.
Sources
- FDIC: Deposit insurance
- NCUA: Share insurance coverage
- CFPB: What is a certificate of deposit (CD)?
- Investor.gov (SEC): Money Market Funds investor bulletin
- Federal Reserve: Regulation D interim final rule on savings deposit transfers, 24 April 2020
- IRS: Topic no. 403, Interest received
- Bank of England: What is the FSCS and what is the new deposit protection limit?
- GOV.UK: Tax on savings interest
- GOV.UK: Cash ISA limit reduction
- APRA: Financial Claims Scheme, banks, building societies and credit unions
- Moneysmart (ASIC): Term deposits
- European Commission: Deposit guarantee schemes
