Crucial points to grasp
- Money market accounts sport similarities to checking accounts, as they often come equipped with tools for spending, such as a debit card or checks. Savings accounts, on the other hand, are more straightforward, offering interest-earning capabilities but lacking transactional features.
- Armed with higher yields, high-yield savings accounts usually prove a better choice than traditional savings accounts in terms of interest earnings.
- By meeting the prerequisites for both, you can enjoy the benefits of a savings account for long-term savings objectives and a money market account for short-term savings purposes.
- Though money market accounts are federally insured, money market funds are neither federally insured nor regulated, with investments made in low-risk, short-term securities that fluctuate in value.
What sets a money market account apart from a savings account? An examination of their key distinctions.
In our economy, money market accounts and savings accounts serve as financial tools that aid savings and withdrawals. These deposit accounts provide readily accessible funds and competitive yields, which can be critical during periods of economic downturn or inflation.
While these two account types share similarities, their differences can play a significant role in choosing the optimal one for your specific requirements. Understanding these distinctions can help you determine the best fit for your circumstances.
Savings accounts versus money market accounts
Both savings accounts and money market accounts offer the ability to deposit funds and earn interest. Unlike savings accounts, however, money market accounts often provide transactional features, such as writing a limited number of checks per month and making bill payments. Some money market accounts also include a debit card.
Earns interest
The following chart summarizes the features associated with savings accounts and money market accounts:
Yes
| Savings account | Money market account || --- | --- || Earns interest | Yes | Yes || ATM withdrawals | Yes | Yes || Maximum unlimited withdrawals without excessive transaction fees* | No | No || Check-writing | No | Sometimes || Debit card | No | Sometimes || Automated deposits possible | Yes | Yes || Insured by FDIC or NCUA | Yes | Yes |
Yes
*Regulation D withdrawal limitations were removed in 2020, enabling banks to offer clients more than the standard six maximum withdrawals and transfers per month without incurring excessive transaction fees. Note, however, that many banks haven't eased their own policies despite the Fed's ruling.
Key statistics on savings accounts and money market accounts
ATM withdrawals
- As of January 20, 2025, the national average APY for savings accounts stands at 0.54 percent. Online banks and credit unions offer rates as much as 10 times higher.
- The national average yield for money market accounts is 0.40 percent, with rates that can be found to be 10 times higher by exploring various options.
- Nearly half of savers (51 percent) have a savings or money market account with an online bank, according to our website's Saving Account Survey.
- The standard balance for transactional accounts like savings accounts and money market accounts sits at $8,000.
Yes
Making an informed decision – money market vs. savings account
Yes
You need not make a choice between a money market account and a savings account. Opening both is possible, and many banks offer both options. For example, you can have a savings account for designated funds, like an upcoming trip or a home down payment, while still maintaining a money market account for paying bills, using a debit card, or writing checks.
However, if you prefer to make a selection, consider the points below:
Unlimited withdrawals without excessive transaction fees*
Identify the purpose of the funds
No
Determine the purpose of your funds by considering whether you want to establish an emergency fund, save for a down payment on a home, or finance a trip. Once you pinpoint your objectives, weigh the pros and cons of each product to determine which one best aligns with your needs. A savings account may suffice if your primary goal is merely saving money for later use.
No
Money market accounts can be suitable options for saving money towards specific goals. However, due to their check-writing and bill-payment capabilities, these accounts may appeal more as transactional accounts. That said, sticking to a savings account could be more beneficial if limiting unnecessary purchases using checks or a debit card is important to you.
Assess the interest rates
Check-writing
Competitive interest rates can be found on both savings accounts and money market accounts, so make sure to shop around to secure a higher yield. Avoid settling for a standard savings account. High-yield savings accounts offer substantially better rates.
No
Money market accounts may feature tiered rates based on balance thresholds, offering higher yields at higher balances. Ensure you review the fine print and weigh the balance you anticipate keeping in the account against the best rates offered by the bank or credit union.
Sometimes
Be cautious of fees
Some savings and money market accounts may charge monthly maintenance fees if you fail to meet the minimum balance requirements or make at least one deposit per month. Be mindful of the account conditions to dodge monthly fees that could eat into your savings. Better yet, find a bank without such fees.
Debit card
Both savings and money market accounts generally limit monthly transactions to around six. Clarify your bank's withdrawal limit rules to avoid going over these limits, which could result in excess withdrawal fees. Keep in mind that these fees may not be prominently advertised, so you may need to delve into the account disclosure or FAQs to obtain a full picture of the bank's fee structure.
No
Advantages and disadvantages of savings accounts
Sometimes
Advantages
- Provides interest
- Insured if at a bank that's an FDIC member, or a credit union that's an NCUA member
- Offers easy access whenever needed
Automated deposits possible
Disadvantages
Yes
- Some banks offer low interest rates, as little as 0.01 percent
- Withdrawals may be limited to a certain sum before incurring a fee
- Some banks demand minimum balances to avoid monthly fees
Yes
Though some potential drawbacks may be associated with certain savings accounts, having a type of account tailored for future planning and emergency savings is crucial.
Advantages and disadvantages of money market accounts
FDIC/NCUA-insured
Advantages
Yes
- Competitive APYs available
- Flexible payment options, including debit cards and checkbooks
- Insured if at an FDIC- or NCUA-member Bank or Credit Union
Yes
Disadvantages
- Higher balance minimums may be required to earn the best rate
- Monthly transaction limits may apply
- Easy access could hamper your efforts to limit spending
Though money market accounts come with unique hindrances in some instances, depositors often opt for having a money market account in addition to a savings account due to the opportunity to earn extra interest while managing bills and bank transactions.
Final thoughts
Whether in a strong or uncertain economy, savings and money market accounts serve as valuable tools. During inflation, high-yield savings accounts and money market accounts can help preserve your purchasing power. As you work to secure your financial future, finding the best high-yield savings accounts and money market accounts takes careful consideration of the APY, minimum balance requirements, and fees.
Once you've defined your objectives and initiated a high-yield savings account or money market account (or both), refocus your efforts on building retirement savings or exploring other financial investments.
- Both savings accounts and money market accounts serve as important financial tools, offering a means to deposit funds, earn interest, and make withdrawals, which can be crucial during economic downturns or inflation.
- When deciding between savings accounts and money market accounts, it's essential to consider the purpose of the funds and assess the interest rates, being mindful of potential fees and transaction limitations. Understanding the differences between these accounts can help you make an informed decision that best suits your financial needs.
