Money Market Accounts vs. Savings Accounts

woman taking dollars money from black wallet.
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When it comes to bank accounts, we have a lot of choices today. A checking account is practical for day-to-day spending and paying bills, but what about putting money away for an emergency, to meet short-term savings targets or to gear up for longer-term goals, such as a down payment for a house?

To stash your cash, savings and money market accounts are popular options. And while they essentially function in the same way, some key differences exist, and one type could suit your needs better than the other. Figuring out which is better for you begins with understanding how they differ.

What Is a Money Market Account?

One way to think of a money market account is as a cross between a checking account and savings account. Unlike savings accounts, money market accounts let you write checks, and some banks have accounts that permit debit card purchases. At the same time, you’ll typically earn a higher interest rate with money market accounts than with interest-bearing checking accounts.

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Money market accounts are usually categorized as a type of savings account, but they tend to give customers a chance to earn higher interest rates than traditional savings accounts.

As noted in GOBankingRates’ guide to money market accounts, you can open an account in the same places you’d open most any bank account, including at a traditional bank, online bank or credit union. Online banks generally have the highest interest rates for money market accounts. For example, online Ally Bank currently is offering a APY, no matter how much you have in the account, and there’s no minimum balance requirements. At KeyBank, you need $5,000 to open an account, and you’ll only earn interest. The APY rises with a higher balance, but it caps at .

What Is a Savings Account?

A savings account works similarly to a money market account. You store your money with a financial institution and earn interest on the balance in your account. The interest paid is the bank’s way of saying thank you — and of persuading you to keep your money there.

Good To Know

A savings account is an ideal place to keep money you might need later, such as an emergency fund or savings for a down payment. It is a better avenue for saving money than, for example, a certificate of deposit. A CD typically requires you to not touch your money for a set amount of time.

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You can expect a smaller APY than you might get with other savings vehicles such as a money market account or certificate of deposit. Some, but not all, savings accounts charge a monthly maintenance fee unless you maintain a minimum balance or qualify for a waiver in another way, and the same is true with money market accounts. Online savings accounts tend to have low or no fees, and they often offer a much higher annual percentage yield than traditional brick-and-mortar banks. Using the comparison between Ally Bank and KeyBank again, Ally’s current savings rate is APY, and Key’s is APY.

How Do Money Market Accounts and Savings Accounts Differ?

Money market accounts and savings accounts have more in common than not, but there is one major difference between the two: your ability to access the money. Money market accounts let you write checks or even make debit card purchases, in some cases, whereas you don’t have this option with traditional savings accounts.

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Here’s a look at how the two accounts are alike and different.

Account Features Savings Account Money Market Account
Interest-bearing Yes Yes
FDIC/NCUA-insured Yes Yes
ATM access Yes Yes
Check writing privileges No In most cases
Unlimited withdrawals No No
Requires minimum deposit Depends on account Depends on account
Penalty for early withdrawal N/A N/A
Compatible with electronic transfers Yes Yes

Is a Money Market Safer Than Savings?

No. They have the same safety guarantees. Anytime you open a bank account, you’ll want to make sure your bank or credit union is insured up to $250,000 by either the Federal Deposit Insurance Corporation or National Credit Union Administration. This means that amount of money is safe even if your bank fails.

Which Type of Account Should You Use?

As with any financial product, your decision to use a money market or savings account depends on your own financial goals. Money market accounts typically require account holders to maintain a high minimum balance to avoid a monthly fee. If you already have a savings account with a high balance and want a risk-free account that provides a higher interest rate — and you meet the minimum balance requirements — you might be better off with a money market account.

What Savings Accounts Are Best For

  • Building wealth slowly, over a long period of time
  • Having money built up in case of an emergency
  • Earning more interest than with a checking account
  • The ability to transfer funds to and from a linked checking account
  • Taking advantage of savings account promotions, which often are offered by banks to encourage customers to open an account

What Money Market Accounts Are Best For

  • Earning higher interest than with standard savings accounts
  • Accessing your cash via debit card or checks but with higher interest than checking accounts
  • Growing your savings faster to better keep up with inflation
  • Avoiding your money being tied up in a “time” account, like a CD, that charges penalties for early withdrawal

Takeaway

When choosing a bank account of any type, it’s wise to compare a number of accounts at a variety of financial institutions. You worked hard for that money. You want a bank that works hard for you, too.

Money Market vs. Savings Account FAQ

Here are the answers to some of the most frequently asked questions on money markets and their differences from savings accounts.
  • How does a money market account differ from a CD?
    • While money market accounts and CDs are both designed to offer higher interest rates than standard savings accounts, they are not even close when it comes to accessing money. While you have easy access to the cash in a money market account, CDs usually come in terms that can range from six months to five years or longer. You have to keep the money in the CD for the length of the term or face an early-withdrawal penalty. On the plus side, you can lock in a high interest rate with a CD for the full length of the term.
  • What are the risks of money market and savings accounts?
    • Because they are federally insured up to $250,000, money market and savings accounts are considered safe places to put your money. About the biggest risk you'll face is if you fail to meet minimum balance requirements and incur a monthly maintenance fee. Beyond that, there's always the risk that you keep too much money in a savings or money market account and miss out on the potentially higher returns you would get by investing in stocks or mutual funds.
  • Is a money market account the same as a money market mutual fund?
    • This is a common mix-up, but money market accounts are not the same as money market mutual funds. The former is a type of deposit account that works like a hybrid between a standard savings account and a checking account. Money market accounts are federally insured.In contrast, a money market mutual fund is a type of investment product that works like any other mutual fund. It holds a basket of securities that can either lose or make money, with no FDIC or NCUA protection. Money market funds do tend to be safer than other funds because they usually hold low-risk instruments such as U.S. Treasury bonds.
  • Is a money market better than a savings account?
    • As with any financial product, your decision to use a money market or savings account depends on your own financial goals. Money market accounts typically require account holders to maintain a high minimum balance to avoid a monthly fee. If you already have a savings account with a high balance and want a risk-free account that provides a higher interest rate -- and you meet the minimum balance requirements -- you might be better off with a money market account.

Kathryn Pomroy and Jami Farkas contributed to the reporting for this article.

Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of Dec. 20, 2022. 

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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