Money market accounts vs. CDs: Finding the right fit for your organization

When it comes to managing your organization’s finances, every dollar counts. Whether you’re looking to grow your reserves or store your funds safely, two options stand out: money market accounts (MMAs) and certificates of deposit (CDs). Both are smart choices, but which one is the best fit for your business — and what if that business is a nonprofit? Let’s break it down.

What is a money market account, and why would my business or nonprofit use one? 

Think of a money market account as the multitasker of the financial world. It’s different than other go-to accounts in that it combines the best features for both spending and saving. MMAs typically offer higher interest rates than traditional savings accounts, making them a great option for businesses — including nonprofits — looking to grow their funds while maintaining flexibility. Nonprofits in particular can benefit from the secure growth and easy accessibility of an MMA, ensuring that every dollar is working as efficiently as possible to support their mission. Too often, MMAs are overlooked when organizations explore their financial options, but they’re a savvy and secure choice. 

Here’s how a money market account works: Your organization deposits funds, which then earn interest — often at tiered rates, meaning the more you save, the more you earn. Plus, MMAs often come with check-writing privileges and debit card access. (For example, UBT’s Value Edge Money Market account allows six free debit transactions per statement cycle, with a $25 fee per additional transaction.) This type of account offers the liquidity you need for operational expenses or unexpected opportunities.

Benefits of a money market account for businesses and nonprofits

1. Higher interest rates: MMAs often outpace standard savings accounts, helping your funds grow faster.
2. Liquidity: Need quick access to your funds? MMAs allow withdrawals (with some limits), making them ideal for organizations that need both growth and flexibility.
3. Accessibility: Deposit funds into your money market account whenever it suits your business needs, ensuring you can continuously grow your savings.
4. FDIC insurance: Rest easy knowing your funds are protected up to $250,000 per depositor, per insured bank, per account ownership category.
5. Operational convenience: With check-writing and debit card options, MMAs are perfect for covering occasional expenses without transferring funds.
6. Tax efficiency: Depending on your situation, interest earned from MMAs may come with certain tax benefits. Consult your tax advisor to explore your options.

What is a CD, and why would my business want one?

A certificate of deposit (CD) is like the financial equivalent of a slow cooker — set it and forget it. You deposit a fixed amount of money for a set term, and in return, you earn a guaranteed interest rate. CDs are perfect for funds your organization won’t need to touch for a while.

Benefits of CDs for businesses

1. Guaranteed returns: CDs offer fixed interest rates, providing predictable income for your business.
2. Low risk: This type of deposit is also FDIC-insured for up to $250,000 per depositor, per insured bank, per account ownership category. Your principal is safe, and your returns are unaffected by market volatility.
3. Higher interest rates: Longer-term CDs often come with better rates than your typical savings account, making them a great option for long-term savings.
4. Diversification: CDs can be a stable addition to your financial strategy, balancing riskier investments.
5. Maximizing strategy: Consider laddering your CDs — i.e., staggering their maturity dates — to ensure steady returns while keeping some funds accessible.

Tips for choosing the right option

Whether you’re an ambitious startup, an established corporation, or a growing nonprofit, the best choice for your business’s funds depends on your financial needs. Need quick access or flexibility? An MMA is your best bet. Seeking stability and higher returns with funds you won’t need for a while? A CD is the smarter choice. Evaluate your cash flow, goals, and risk tolerance to determine the right fit — or the right combination — to help achieve your objectives.

Practical example

Picture this: A small manufacturing business ends the quarter with surplus funds. They deposit $15,000 into a money market account offering 4.00% annual percentage yield (APY) for 12 months, earning $600 in interest while keeping funds accessible for equipment upgrades. Simultaneously, they invest $10,000 into a 36-month CD with a 3.75% APY, locking in $1,125 in steady returns over the term. Together, their smart strategy earns $1,725 in total returns over three years — balancing flexibility and stability.

The bottom line

With higher returns than standard saving accounts and more security than many investment options, both money market accounts and CDs offer stand-out advantages, giving your organization the opportunity to grow funds safely and strategically. Whether you’re looking for the flexibility of a money market account, the stability of a CD, or an intentional blend of both, UBT’s financial experts are ready to help you find the ideal solution to support your business’s success.

Don’t miss out on guaranteed growth! 

There is no time like the present to get started on strategically growing your organizational nest egg. Right now, your business can earn up to a 3.80% APY* for 12 months on balances of $10,000 and up (0.85% APY* on balances under $10,000) when you open a new Value Edge Money Market account with at least $10,000 in new money. It’s a smart business strategy and banking you can feel good about. Stop into your nearest branch to get started today or click here to learn more!