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Money Market vs Savings Account: Which One Is Better?

Rebecca Lake • June 3, 2024

A woman sitting on a couch while checking her money market and savings accounts on her phone.

Imagine you’re standing in front of two doors, each leading to a different type of bank account. One is labeled “Money Market Account,” and the other “Savings Account.” Behind each door are unique benefits to help you grow your money.

Which one should you open?

Your financial needs and goals can influence your decision between a money market vs. savings account. We’ll walk you through how each works so you have all the information you need to decide which one makes the most sense for you.

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What is a money market account?

A money market account (MMA) is a deposit account that combines some of the features of a checking account with those of a savings account. You can find money market accounts at traditional banks, credit unions, and online banks.¹

Here’s a quick rundown of the highlights:

  • Money market accounts can earn interest and, at some banks, rates may surpass those offered by savings accounts.
  • Banks may offer money market savers check-writing privileges, debit cards, or ATM cards for convenient access to funds.
  • Transactions may be unlimited at some banks, while others cap the number of withdrawals you can make.
  • Money market rates may be tiered, meaning banks pay different rates based on your account balance, or they may be the same across all balances.
  • Most MMAs are insured by the Federal Deposit Insurance Corporation (FDIC) up to the legal limit, offering a safe place for your savings.¹

Minimum balance requirements and fees will vary by bank. It’s possible to find online banks offering money market accounts with no monthly fee or minimum balance requirements. In addition, some may not require an opening deposit, which could be attractive if you’re just getting started with saving.

Some banks offer jumbo money market accounts. These are designed for super savers who maintain higher balances. You might need anywhere from $10,000 to $25,000 to open one of these accounts.²

Overall, a money market account is an attractive option for those looking to earn better returns without locking their funds away in a certificate of deposit (CD).³

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What is a savings account?

A savings account is a basic bank account to help you put money aside. Similar to money market accounts, you can find them at brick-and-mortar banks, credit unions, and online banks.

Here are the highlights of savings accounts:

  • Savings accounts can pay interest, with rates varying by bank.
  • Savings accounts usually don’t include check-writing privileges, though some banks offer ATM cards for convenience.
  • Like MMAs, bank savings accounts are FDIC-insured, providing the same level of security for your deposited funds.
  • Banks may allow unlimited withdrawals from savings or limit the number of withdrawal transactions you can make each month.

Where’s the best place to open a savings account? Online banks can be a more attractive option if you’re looking for savings accounts with low opening deposit requirements, no minimum balance requirements, and no monthly fees. An online bank may also pay a better interest rate and annual percentage yield (APY) to savers than a traditional bank.

Savings accounts can be a great option for funding specific goals, like building an emergency fund or setting aside money for a down payment on a home. Some banks make it easy to work toward multiple goals by allowing you to create multiple savings “buckets” and offering automatic savings tools, like round-ups or recurring transfers.

Money market account vs. savings account

Understanding the differences between money market accounts and savings accounts is key to choosing the right one for your financial needs. Both account types offer interest on your deposits and are excellent tools for saving money, but you may find that one is a better fit than the other.

You might choose a money market account if you…

  • Can get a higher rate and APY than you would with a savings account.
  • Would like to be able to occasionally write checks, make purchases with a debit card, or withdraw cash at ATMs.
  • Can comfortably meet the bank’s opening deposit and minimum balance requirements, if any.

On the other hand, you might prefer a savings account if you…

  • Have found a high-yield savings account that pays a better rate than similar money market accounts.
  • Don’t necessarily need to be able to write checks or withdraw cash at ATMs.
  • Need a savings option with lower opening deposit and minimum balance requirements.

Remember that both types of accounts are usually FDIC-insured, which means that on the off chance your bank fails, your deposits are protected. The current FDIC coverage limit is $250,000 per depositor per account. It’s relatively easy to find out if a bank is insured by looking for the FDIC logo on its website or at a branch.

Pros and cons of a money market account

Pros:

  • Higher interest rates. Money market accounts may offer better returns compared to regular savings accounts, making your money work harder.
  • Access. A money market account can offer the same degree of flexibility as a checking account if you’re able to write checks or the bank offers an ATM card or debit card.
  • Safety. Your money is protected up to the FDIC-insured limit, making it a low-risk place to grow your wealth.

Cons:

  • Transaction limits. Some banks may limit certain types of withdrawals and transfers.
  • Higher minimum balances. Banks may require a higher balance to earn the top interest rates or to avoid fees.
  • Monthly fees. Some MMAs charge monthly maintenance fees unless you’re able to waive them by meeting minimum balance or direct deposit requirements.

Pros and cons of a savings account

Pros:

  • Security. Like money market accounts, savings accounts are a safe place to accumulate funds, thanks to FDIC insurance.
  • Lower fees and minimums. Compared to MMAs, savings accounts typically have lower minimum balance requirements and fewer monthly fees.
  • Ease of access. Some savings accounts allow for easy access to funds through ATMs so you can withdraw cash when needed.

Cons:

  • Withdrawal limits. Some banks may restrict the number of withdrawals you can make from a savings account each month.
  • Fees. Traditional savings accounts may impose monthly maintenance fees, and banks may charge excess withdrawal fees if you have more than six transactions per month.
  • Lower rates. Savings accounts may offer lower interest rates than money market accounts, which could mean slower savings growth.

Do your research to find the right savings option

Money market and savings accounts offer secure and practical ways to save money. The best choice depends on your financial goals, how you intend to use the account, and how much flexibility you need with your funds. Of course, it’s also a good idea to consider the fees you might pay and the rates you could earn when selecting an account.

If you’re opening a savings or money market account for the first time, learn how to choose a bank.

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¹ Information from the Consumer Financial Protection Bureau's "What is a money market account?" as of May 8, 2024: https://www.consumerfinance.gov/ask-cfpb/what-is-a-money-market-account-en-1007/

² Information from Navy Federal Credit Union's Money Market Savings Accounts as of May 28, 2024: https://www.navyfederal.org/checking-savings/savings/money-market.html

³ Information from the Consumer Financial Protection Bureau's "What is a certificate of deposit?" as of May 8, 2024: https://www.consumerfinance.gov/ask-cfpb/what-is-a-certificate-of-deposit-cd-en-917/

⁴ Information from the Federal Reserve's Savings Deposits Frequently Asked Questions as of May 8, 2024: https://www.federalreserve.gov/supervisionreg/savings-deposits-frequently-asked-questions.htm

⁵ Information from the FDIC's "Are My Deposit Accounts Insured by the FDIC?" as of May 8, 2024: https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/index.html

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