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Money market deposit vs. savings account — Which is better?

Where should you be putting your money?

If you have money for short-term financial goals like emergencies or purchases you want to make in the next few years, like a car or home, it should be saved instead of invested. Keeping those funds safe from market volatility is the best way to ensure you can spend them.

Since investing involves risk, it’s only suitable for long-term goals, like retirement, requiring you to outpace inflation and earn higher returns than savings.

But there are different savings vehicles, like regular savings accounts, high-yield savings accounts (HYSA) and money market deposit accounts (MMDA). We’ll review how they differ and which account type is best for you.

How are money market deposit accounts and savings similar?

Money market accounts are like savings accounts because they pay interest. However, they typically come with features that make it easier to access your funds. For example, an MMDA may come with a debit card and paper checks, giving you more ways to tap your cash or send payments.

With regular or high-yield savings, you may only have a local branch, ATM card or online transfers to withdraw cash. However, savings and MMDAs can limit the number of monthly withdrawals, such as via ATMs, paper checks and online transfers, to six per statement cycle. Going over the limit means you could get charged a fee for each additional transaction.

The Federal Reserve relaxed the withdrawal limit in 2020 due to the pandemic. That allows financial institutions to enforce a monthly withdrawal limit with fees or not. So, understand your bank or credit union’s savings and money market withdrawal rules.

Another similarity between savings and MMDAs is that they typically give you insurance through the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per institution, per depositor, per account ownership category. Credit unions offer similar insurance through the National Credit Union Administration (NCUA), with the same protection amounts.

Be aware that a similar-sounding financial product, called a money market fund, is an investment without any insurance.

How are money market deposit accounts and savings different?

While MMDAs and savings have much in common, their differences are essential when choosing the right place for your cash. Generally, their paid interest and fees differ, especially for higher balances.

While an MMDA may charge a monthly service fee, it typically pays a higher interest rate than a savings account. It may also offer tiered interest rates, which increase as your balance increases. Or it may waive service fees if you maintain a minimum balance.

However, it’s possible to find HYSAs with online-only banks paying more interest than regular savings and MMDAs. Therefore, always shop for accounts paying the highest annual percentage yield (APY) and charging the lowest or no monthly fees based on how much you plan to deposit and maintain in an account.

High-yield savings could give you more interest and flexibility if you don’t keep a minimum balance to qualify for a higher MMDA interest rate. Savings have low or no minimum balance requirements to open and maintain the account.

How to choose and open the best account

Shop and compare how different MMDA and HYSA institutions stack up with the following criteria:

  • APY – includes the effects of compounding and represents how much interest your money will earn in an account.
  • FDIC or NCUA insurance – ensures a deposit institution offers protection in case of failure.
  • Minimum opening deposit – may not be required but shows the least amount you must have to open an account.
  • Minimum balance requirement – may be required if the account charges fees when your balance dips below a threshold.
  • Fees – could include overdraft fees, monthly service fees, per transaction fees and more.
  • Convenience – including ATM availability, mobile banking, withdrawal limits and various features that allow you to manage your funds.
  • Customer service – based on what you’re likely to need, such as contacting someone by phone 24/7, using an online help desk or getting answers from a chatbot.
  • Security – look for institutions that offer security features like two-factor authentication and encrypted communications.

Like any bank or credit union account, opening an MMDA, HYSA or regular savings account doesn’t affect your credit scores. You must provide your full name, address, Social Security number and a government-issued ID. Once your account is open, you can link it to your checking or retirement accounts for easy withdrawals and transfers, including your initial opening deposit.

About the author

Laura Adams is a money expert and spokesperson for Finder. She’s one of the nation’s leading personal finance and business authorities. As an award-winning author and host of the top-rated Money Girl podcast since 2008, millions of readers, listeners and loyal fans benefit from her practical advice. Laura is a trusted source for media and has been featured on most major news outlets, including ABC, Bloomberg, CBS, Consumer Reports, Forbes, Fortune, FOX, Money, MSN, NBC, NPR, NY Times, USA Today, US News, Wall Street Journal, Washington Post and more. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Her mission is to empower consumers to live healthy and rich lives by making the most of what they have, planning for the future and making smart money decisions every day.

This article originally appeared on and was syndicated by

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