Money Market Accounts vs. Savings Accounts: Know the Difference

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As a child, you might have stored all your extra change in a piggy bank, learning early on that your money can grow if you just leave it in there. The same principle holds true in the adult world by parking your money in a money market or savings account.

Savings and money market accounts exist to let you meet long-term financial goals. They are similar in many ways, but there are also some key differences. Figuring out which is better for you begins with understanding how they differ. Keep reading to learn more.

Money Market Fund vs. Savings Account: The Basics

Money market accounts and savings accounts are both deposit accounts designed to help customers save money for various financial goals, whether it’s amassing enough cash for a house down payment, building an emergency fund or financing a dream vacation.

Before learning about some of the differences between money market accounts and savings accounts, it’s helpful to have a basic understanding of each.

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 or even make debit card purchases. At the same time, you’ll earn a much 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, except they give banks slightly more flexibility in how they can use the funds. Money market accounts also give customers a chance to earn higher interest rates than with 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.

How To Open a Money Market Account

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.

Money market deposit accounts held by banks and credit unions are federally insured up to $250,000 by either the Federal Deposit Insurance Corporation FDIC or National Credit Union Administration. This means that amount of money is safe even if your bank fails.

What Is a Savings Account?

A savings account works in much the same way as a money market account. You store your money there 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. Savings accounts, like money market accounts, are federally insured up to $250,000 per account.

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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’s not the best place to keep your money if you need immediate access unless you have a savings account tied to a checking account at the same bank.

Because of federal banking regulations, the typical savings accounts allows a total of six free transfers or withdrawals per statement cycle (though that limit was temporarily suspended waived during the COVID-19 pandemic). You can also expect a smaller interest rate 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. Online savings accounts tend to have low or no fees.

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, whereas you don’t have this option with traditional savings accounts.

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 In most cases
Penalty for early withdrawal N/A N/A
Compatible with electronic transfers Yes Yes
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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.

What Savings Accounts are Best For

  • Building wealth slowly, over a long period of time
  • Having money built up in case of an unexpected emergency
  • Earning more interest than with a checking account
  • Online banking, which could earn you even higher interest
  • Taking advantage of savings account promotions, which are often 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 and keeping up with inflation better
  • Avoiding your money being tied up in a “time” account, like a CD, that charges penalties for early withdrawal

Kathryn Pomroy contributed to the reporting for this article.

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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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