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Money market vs. savings accounts: What’s the difference?
Compare savings options, interest rates and balance requirements.
Choosing between a money market vs. savings account can be tough. Use this guide to find out which one is best for your savings goals.
What’s the difference between money market vs. savings accounts?
A savings account earns a competitive APY and gives a safe place to store funds. A money market account is a type of savings account, but it comes with special checking account features that give you more access to your money. This table breaks down the major differences between money market vs. savings accounts:
| Money market | Traditional savings | |
|---|---|---|
| Best for | Those who want checks, a debit card and flexible access to their money while they save. | Those who want an account with little to no minimum deposit or monthly balance requirements. |
| National interest rate average | 0.09% | 0.06% |
| Check writing | Yes | No |
| ATM access | Yes | Varies by account |
| FDIC or NCUA insurance | Yes | Yes |
| Minimum deposit | $1,000+ | $0–$1,000 |
| Six-transaction limit | Yes | Yes |
Which account offers higher interest rates?
According to current FDIC averages, money markets offer a slightly higher APY than savings accounts. This higher average is thanks to the slightly stricter requirements of a money market account, such as larger minimum deposits or balance requirements.
Money market vs savings account: Which is best for me?
Money market and traditional savings accounts are both effective ways to save, but the best option for you depends on your situation:
Pick a money market account if …
- You can meet higher deposit requirements.
- You need more flexible access to your money.
- You want a debit card or check-writing privileges.
- You want to be able to spend money more easily.
- You have a large sum of money to deposit.
Pick a traditional savings account if …
- You have trouble limiting your spending.
- You’re just starting to save.
- You don’t plan on spending the money in the near future.
- You want to open the account with a small deposit.
- You want to avoid fees.
Pros and cons of money market vs. savings accounts
Both money market and traditional savings accounts provide you a safe place to store your money. But the APY you’ll earn and the flexibility you’ll have to access your funds are two main ways they differ. Weigh the pros and cons:
Money market accounts
Pros
- Flexible access. With a debit card and check writing abilities, you can cover expenses, pay bills and more — as long as you keep it to less than six transactions.
- Potentially higher rates. Money market accounts often have slighter higher interest rates than traditional savings accounts, so you could save more money.
Cons
- Higher deposit requirements. Money market accounts often have higher deposit requirements than traditional savings accounts.
- Easier to overspend. With such easy access to your money, it could be tempting to spend money instead of leaving it to earn interest.
- More fees. Watch out for overdraft fees, transfer charges and other fees.
Traditional savings accounts
Pros
- Encourages saving. You won’t get a debit card or check writing abilities, so it’s harder to dip into your savings.
- Lower deposit requirements. Traditional savings accounts generally have lower deposit requirements than money market accounts, making it easier to start saving.
Cons
- Potentially lower interest rates. Interest rates on traditional savings accounts are often slightly lower than money market accounts.
How to compare money market vs. savings accounts
Consider these features when trying to decide between a money market and traditional savings account:
- Interest rates. Generally money market accounts pay a higher APY — but that usually depends on a higher opening deposit. Whichever you choose, make sure the account compounds interest daily to maximize your earnings.
- Deposit requirements. Money market accounts usually require a high opening deposit of at least $2,500. If you don’t have significant savings, you might want to consider a traditional savings account.
- Features. Explore and compare account features like reward programs, mobile banking and budgeting tools.
- Fees. Look out for service fees for balance minimums, withdrawing funds and outgoing wires.
- Access. Consider how much you want access to your money. Federal regulation limits both accounts to six withdrawals. But this rule could be temporarily waived due to the coronavirus pandemic. Check with your provider.
- Security. Regardless of which account you choose, find out if it’s covered by FDIC deposit insurance or any other security features.
Compare money market and savings accounts
Compare money market accounts and savings accounts by current interest rates by selecting up to 4 accounts and clicking “Compare.”
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Bottom line
Money market accounts provide flexible access and higher interest rates, but often have higher deposit requirements. Traditional savings accounts, on the other hand, can limit spending and have lower deposit requirements, making it easy to start saving. Compare your options for the best savings accounts and best money market accounts to find one that’s right for you.
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Best money market rates
Find the best money market rates in 2023 with American First Credit Union, Ponce Bank, Patriot Bank, FVCbank and more.
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