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CD vs money market — 5-year growth comparison
A CD locks your money in at a fixed rate; a money market account stays flexible and its rate can move. Both compound annually here, so the comparison is apples to apples. Enter your numbers below.
★ MONEY · SAVINGS · COMPARISONS
CD vs Money Market Account: Which Earns More in 2026?
$10,000 at 4.50% for 5 years becomes $12,461.82 in a CD — and $12,166.53 in a money market account. The CD wins by $295.29 at today’s rates, but the money market can catch up if rates rise or you need the cash early.
How the CD vs money market comparison works
A certificate of deposit and a money market account are both savings accounts, and both are usually FDIC-insured up to $250,000, but they trade in opposite directions. A CD pays you a fixed rate in exchange for locking your money away for a set term — 5 years here — and charges you a penalty, often 180 days of interest, if you break it early. A money market account pays a variable rate, lets you withdraw whenever you like, and usually comes with a debit card or checks, but its rate can fall as fast as it rises. This calculator holds the deposit and the compounding the same for both and asks one question: does the CD’s higher fixed rate beat the money market’s flexibility?
At the defaults — $10,000, a 4.50% CD for 5 years, and a 4.00% money market that stays flat — the CD grows by a factor of 1.045^5 = 1.24618 to $12,461.82, earning $2,461.82 of interest, while the money market grows by 1.04^5 = 1.21665 to $12,166.53, earning $2,166.53. The gap is $295.29, and it is entirely the CD’s extra half a percentage point, compounded for five years.
| Feature | Certificate of deposit | Money market account |
|---|---|---|
| Rate | Fixed for the term | Variable — can rise or fall |
| Access | Locked until maturity | Withdraw any time |
| Early withdrawal | Penalty, often 180 days’ interest | None |
| Typical use | Money you will not need for years | Emergency fund, saving for a goal |
| FDIC insurance | Up to $250,000 per depositor, per bank | Up to $250,000 per depositor, per bank |
| Checks / debit card | No | Usually yes |
The worked example, line by line
Setup: deposit $10,000; CD APY 4.50%; term 5 years; money-market APY 4.00%; rate change 0.00 points; hold to maturity.
Line 1 — the CD growth factor. (1 + 0.045)^5 = 1.24618. One dollar becomes $1.25 after five years at 4.50%.
Line 2 — the CD final balance. $10,000 × 1.24618 = $12,461.82.
Line 3 — the CD interest. $12,461.82 − $10,000 = $2,461.82.
Line 4 — the money-market growth factor. (1 + 0.04)^5 = 1.21665.
Line 5 — the money-market final balance. $10,000 × 1.21665 = $12,166.53, earning $2,166.53 of interest.
Line 6 — the gap. $12,461.82 − $12,166.53 = $295.29. The CD wins.
Every branch, checked
Money-market APY 4.75%: the money market grows to $12,611.60 while the CD stays at $12,461.82 — the money market wins by $149.78. A three-quarter-point advantage is enough to flip the winner at the same 5-year term.
3-year term: the CD grows to $11,411.66 and the money market to $11,248.64 — the CD still wins, by $163.02, but the gap is smaller, because the rate advantage has fewer years to compound.
$25,000 deposit: the CD grows to $31,154.55 and the money market to $30,416.32 — the CD wins by $738.23. The gap scales exactly with the deposit: 2.5 times the money, 2.5 times the gap.
Money-market rate rises 1.00 point after year 1: the money market earns 4.00% in year 1 and 5.00% in years 2 to 5, growing to $12,641.27 against the CD’s $12,461.82 — the money market wins by $179.45. One point of rate rise, sustained for four years, beats the CD’s locked rate.
Break the CD at year 2: the CD balance at year 2 is $10,920.25, and a 180-day interest penalty of $10,920.25 × 4.50% × 180/365 = $242.34 leaves a net of $10,677.91. The money market at year 2 is $10,816.00 — the money market wins by $138.09. Breaking a CD early is how a winning CD becomes a losing one.
Reverse — what ties the CD: a money-market APY of 4.50% ties the CD exactly at the same 5-year term, because at the same term the tie rate is the CD’s own rate. And if you want the money market to earn the same $2,461.82 of interest as the CD, you need to deposit $11,362.97 in it instead of $10,000 — the money market needs about 14% more principal to make up for its lower rate.
What the defaults assume
Both accounts compound once a year on the same single deposit, with no withdrawals, no fees, and no taxes — interest is taxed as ordinary income in a real account, which shrinks both balances by the same percentage and never changes the winner. The CD rate is fixed for the whole term; the money-market rate is flat in year 1 and then moves by the amount you enter, holding at the new rate for the rest of the term. The early-withdrawal penalty is 180 days of interest on the balance at withdrawal, the most common CD penalty; some banks charge 90 days on short terms or a full year on long ones, so check your bank’s schedule. The money market is assumed to be an FDIC-insured bank account, not a money market fund, which is an investment and is not FDIC-insured. Rounding convention: money is rounded to cents and all figures are computed from unrounded values, rounded only for display.
Output · formula · meaning
| Output | Formula | What it means |
|---|---|---|
| CD growth factor | (1 + 4.50%)^5 | 1.24618 — $1 becomes $1.25 in 5 years. |
| CD final balance | $10,000 × 1.24618 | $12,461.82 after 5 years. |
| CD interest | final balance − deposit | $2,461.82 of interest. |
| Money-market growth factor | (1 + 4.00%)^5 | 1.21665 — $1 becomes $1.22 in 5 years. |
| Money-market final balance | $10,000 × 1.21665 | $12,166.53 after 5 years. |
| Money-market interest | final balance − deposit | $2,166.53 of interest. |
| Gap | CD final − money-market final | +$295.29 — the CD wins. |
| Money-market APY 4.75% | $10,000 × (1.0475)^5 | $12,611.60 — money market wins by $149.78. |
| 3-year term | same rates, 3 years | $11,411.66 vs $11,248.64; gap $163.02. |
| $25,000 deposit | same rates, $25,000 in | $31,154.55 vs $30,416.32; gap $738.23. |
| Rate rises 1.00 point | 4.00% yr 1, 5.00% yrs 2–5 | $12,641.27 — money market wins by $179.45. |
| Break CD at year 2 | balance − 180 days’ interest | $10,677.91 net (penalty $242.34) vs $10,816.00; money market wins by $138.09. |
| Reverse: tie rate | MM APY that matches the CD | 4.50% at the same 5-year term. |
| Reverse: matching deposit | CD interest / MM interest rate | $11,362.97 in the money market earns the same $2,461.82. |
Who uses this
- The saver with $10,000 and no plans for it: wonders whether to lock it in a 5-year CD or keep it in a money market, and learns the CD ends $295.29 ahead — so they take the CD, because the money is genuinely spare.
- The saver who thinks rates will rise: enters a 1-point rise after year 1 and learns the money market ends $179.45 ahead — so they keep the money flexible and wait for the better rate.
- The saver who might need the cash in two years: tests breaking the CD at year 2 and learns the penalty leaves them $138.09 behind the money market — so they skip the CD and take the flexible account.
- The saver comparing a 4.75% money market: enters the higher rate and learns the money market wins by $149.78 — so they take the money market and keep the liquidity for free.
Accuracy & limitations
The math is exact for the numbers you enter: both balances are the deposit times the annual-compounding factor, the penalty is 180 days of interest on the balance at withdrawal, and the tie rate and matching deposit are solved from the same factors. What the model cannot do is predict the money-market rate: a real money market moves with the Federal Reserve, and a rate that rises 1 point can also fall 1 point, which would widen the CD’s lead instead. It also assumes annual compounding, while many accounts compound monthly or daily, which adds a few dollars over five years; taxes are ignored, and the interest is taxed as ordinary income; and the penalty is assumed to be 180 days of interest, while some banks charge 90 days or a full year. Read the CD vs savings account calculator for the plain savings version of this choice, and the best place for cash in 2026 page for where spare cash should sit.
Cite this calculatorBright Side Kit. “CD vs Money Market Account: Which Earns More in 2026?” brightoolbox.com, 2026. Method: annual compounding, FV = P(1+r)^n; money-market factor = (1+r1)(1+r2)^(n−1) with the rate change applying from year 2; early-withdrawal penalty = balance at withdrawal × CD rate × 180/365. Defaults: $10,000, CD 4.50%, 5 yr, money market 4.00%, change 0.00 points, hold to maturity → CD $12,461.82 ($2,461.82 interest), money market $12,166.53 ($2,166.53 interest), CD wins by $295.29; money-market APY 4.75% → money market $12,611.60, wins by $149.78; 3-year term → CD $11,411.66 vs money market $11,248.64, CD wins $163.02; $25,000 deposit → CD $31,154.55 vs money market $30,416.32, CD wins $738.23; rate rises 1.00 point after year 1 → money market $12,641.27, wins by $179.45; break CD at year 2 → balance $10,920.25, penalty $242.34, net $10,677.91 vs money market $10,816.00, money market wins $138.09; tie rate 4.50%; matching deposit $11,362.97.
Bright Side Kit. "CD vs Money Market Account: Which Earns More in 2026?" https://brightoolbox.com/cd-vs-money-market/ Accessed October 24, 2026.Frequently asked questions
Which earns more, a CD or a money market account?
The CD, at today’s rates — by $295.29 on $10,000 over 5 years. A 4.50% CD grows to $12,461.82 while a 4.00% money market grows to $12,166.53. The CD wins because its rate is higher and locked in, but the money market wins if its rate rises or you need the cash early.
What money-market rate would tie the CD?
4.50%. At the same 5-year term, a money market paying 4.50% grows to exactly $12,461.82, the same as the CD. Anything above that, and the money market wins; anything below, and the CD wins.
What happens if I break a CD early?
You lose 180 days of interest. Breaking a $10,000 CD at year 2 leaves a balance of $10,920.25 minus a $242.34 penalty, or $10,677.91 net — which is $138.09 behind the money market at the same point. Only open a CD with money you will not need before maturity.
Does the money market win if rates rise?
Yes — a 1-point rise flips it. If the money-market rate rises 1.00 point after year 1, to 5.00%, it grows to $12,641.27 against the CD’s $12,461.82 and wins by $179.45. A variable rate is a bet that rates go up; a fixed rate is a bet that they go down.
Is a money market account FDIC-insured?
A bank money market account is, up to $250,000 per depositor, per bank — the same as a CD. A money market fund is different: it is an investment product, not a bank account, and it is not FDIC-insured. Check which one you are opening.
Should I choose a CD or a money market for my emergency fund?
The money market. An emergency fund has to be there the day you need it, and breaking a CD costs 180 days of interest. The CD’s extra $295.29 over five years is not worth losing access to your safety net.
How much do I need in a money market to earn the same interest as the CD?
$11,362.97. At 4.00% for 5 years, a $11,362.97 deposit in the money market earns the same $2,461.82 of interest as $10,000 in the 4.50% CD — about 14% more principal to make up for the lower rate.
Does the term length change the winner?
It changes the size of the gap, not the winner. Over 3 years the CD wins by $163.02 instead of $295.29 over 5 years, because the rate advantage has fewer years to compound. The CD wins at any term as long as its rate stays higher and the money-market rate stays flat.