Money Market Accounts vs. Savings Accounts: What’s the Difference?

Which of these accounts is best for you?

As a child, you might have stored all your extra change in a piggy bank. Something so small and pink was a great teacher that helped you learn that your money grows if you just leave it alone. Today, you’ve worked hard and have amassed a large chunk of money to set aside. A piggy bank is now too small, so you need a better place to park your cash. Thankfully, there are several good choices: money market accounts and savings accounts.

While checking accounts are best for everyday expenses, a savings account or money market account is better for meeting long-term financial goals. These two account types have several similarities and differences. So which is better?

To help you decide which is best for you, here’s a closer look at money market and savings accounts, along with their key differences and the rates you can expect to earn.

What Is a Money Market Account?

Money market accounts are similar to savings accounts, but they give banks slightly more flexibility in the way they can use the funds. Although that doesn’t actually affect customers, money market accounts give you the opportunity to earn a higher interest rate on your account balance. Many money market accounts let you access your money using a debit card or up to six digital or check transfers per month.

As this GOBankingRates guide to money market accounts explains, you can open a money market account in the same places where you do your other banking, such as:

  • Your local bank
  • An online bank
  • A credit union

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 happy with a money market account.

Money market deposit accounts held by banks and credit unions are federally insured by the Federal Deposit Insurance Corporation. Banks, the National Credit Union Share Insurance Fund and credit unions can insure up to $250,000 per account, so your money is safe even if your bank fails.

When To Use a Money Market Account

Money market accounts are best for:

  • Earning higher interest than standard savings accounts
  • Accessing your cash via debit card or checks
  • Growing your savings faster and keeping up with inflation better
  • Avoiding your money being tied up in a time account, like a certificate of deposit

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What Is a Savings Account?

A savings account is much the same as a money market account. You store your money securely and earn interest on the balance in your account. The bank pays you interest on your savings because it uses your money for other customers’ loans. The interest paid is the bank’s way of saying thank you. Savings accounts are also federally insured.

A 2016 GOBankingRates survey found that about 69% of Americans have less than $1,000 in their savings account. That’s not a lot of cash if an emergency arises. Most people would probably agree that having a savings account — or multiple savings accounts — is well advised.

When To Use a Savings Account

Savings accounts are best for:

  • Accessing your money without writing checks, with up to six transfers per month
  • Building a bundle of money slowly, over a long period of time
  • Having money on hand 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

Some savings accounts charge fees — and you’ll likely have to meet a minimum balance to avoid them.

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Key Differences Between Money Market Accounts and Savings Accounts 

Although savings accounts and money market accounts are close relatives, there are a few differences:

  • Money market accounts often include a debit card, while savings accounts typically do not
  • Money market accounts usually earn higher interest than standard savings accounts
  • You can write checks with many money market accounts
  • Money market accounts often have higher minimum deposit requirements than savings accounts

You’ll find the most common similarities and differences between money market accounts and savings accounts outlined in this chart:

Key Similarities and Differences Between Savings and Money Market Accounts

Account FeaturesSavings AccountMoney Market Account
Interest-bearingYesYes
FDIC/NCUSIF-insuredYesYes
ATM accessYesYes
Check writing privilegesNoIn most cases
Unlimited withdrawalsNoNo
Requires minimum depositDepends on accountIn most cases
Penalty for early withdrawalN/AN/A
Compatible with electronic transfersYesYes

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Best Savings Account Rates

Many online banks offer higher annual percentage yields on savings and money market accounts than brick-and-mortar banks can offer. Plus, you can open your account from the comfort of your home and manage your account anytime, online.

Some savings accounts have no monthly service charges and low minimum balance requirements to earn interest.

To choose the best savings account to help you meet your financial goals, take a look at the 10 best savings accounts rates in 2019 (as of Oct. 21, 2019) — listed in no particular order:

Best Savings Account Rates

Bank and Savings AccountAPY 
Salem Five Direct Bank eOne Savings2.01%
CitiBank Citi Accelerate Savings2.05%
Marcus by Goldman Sachs Online Savings Account1.90%
SFGI Direct Savings Account2.27%
Discover Bank Online Savings Account1.85%
Synchrony Bank High-Yield Savings1.90%
FNBO Online Savings1.90%
American Express Personal Savings Account1.90%
Ally Bank Online Savings Account1.80%
Vio Bank High Yield Online Savings2.27%

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Best Money Market Account Rates

Now that you know the best savings account rates, take a look at the 10 top money market rates available (as of Oct. 21, 2019), listed in no particular order:

Best Money Market Account Rates

Bank and Money Market AccountAPY
Customers Bank Ascent Money Market2.25%
UFB Direct Premium Money Market Account2.15%
CFG Community Bank Online High Yield Money Market Account2.36%
Sallie Mae Money Market Account2.00%
Northpointe Bank Money Market Account1.50%
BBVA Money Market Account2.10%
Total Direct Bank Money Market Account2.35%
Memory Bank Online Money Market Account2.25%
Prime Alliance Bank Personal Money Market1.97%-2.22%
BMO Harris Bank Platinum Money Market2.20%

Although 0.16% APY is the national average for money market accounts, many pay significantly higher interest than online savings accounts. In return, expect higher minimum deposits — and higher minimum balances to qualify for the best rates.

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Check Out: Best Money Market Accounts of 2020

Money Market Accounts vs. Savings Accounts: Which Should You Choose?

Many people choose a money market account over a savings account to earn higher interest on their savings. But some money market accounts are out of reach for average customers because of their high minimum deposits.

Savings account rates are notoriously low at brick-and-mortar banks but much higher at online banks. Despite the convenience of online banks, some people prefer face-to-face time with their local bankers.

Also consider that some banks charge a monthly savings account fee regardless of your balance, although you usually have opportunities to waive these fees by meeting certain requirements. The best money market accounts don’t charge monthly account fees.

Whichever account you choose, you can’t go wrong. Saving for a rainy day is always the best choice, whether that is with a savings account or a money market account.

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Kathryn Pomroy is a professional writer with expertise in personal finance, banking, credit cards, investments and loans. She has written for major publications, small businesses and many well-known personal finance companies. Kathryn holds a B.A. in journalism.

Rates are accurate as of Oct. 21, 2019, and are subject to change.