CD vs Money Market Comparison Calculator
Money market funds offer instant liquidity at variable rates (4.5-5.0% in early 2026). CDs lock in fixed rates 4.4-5.2% but charge early withdrawal penalties (3-12 months of interest). Choosing depends on liquidity needs, rate outlook, and tax treatment.
Money Market Liquidity Premium
Money market funds (Vanguard VMFXX, Fidelity SPRXX, Schwab SWVXX) offer same-day liquidity at variable rates that track short-term Treasury yields. No penalty for withdrawal. Yield resets daily as Fed adjusts rates. Best for emergency funds, transactional accounts, short-term parking before deployment.
CD Lock-In Trade-Off
CDs lock yield for term length. Pro: no reinvestment risk if rates fall. Con: cannot benefit if rates rise, plus early withdrawal penalty (3-12 months of interest typical). Federally insured up to $250K per depositor per bank. Best for: known cash needs at specific future date (down payment, tax payment, education expense).
Tax Treatment Difference
Both taxable as ordinary interest at federal rate. Money market funds in your taxable brokerage paid 1099-INT or 1099-DIV depending on fund structure. CDs always 1099-INT. Treasury money market funds (VUSXX) pay partial state-tax-free interest — best for high-state-tax investors. Government money market funds (VMFXX) ~30-50% state-tax exempt.
Source: FDIC Quarterly Banking Profile 2025, ICI Money Market Fund Statistics 2025. Last updated: May 2026.