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Money market accounts vs. savings accounts

By Andrew Freiburghouse | Money Rates Columnist

savings accounts

Money market accounts and traditional savings accounts are not as different as apples and oranges, but it's important to note the differences that typically exist between them. While both usually offer excellent security and good liquidity, there are often subtle differences between these accounts that savers should note before choosing one. 

What is a money market account?

A money market account may require more funds from a depositor than an ordinary savings account, but it may include some perks that a savings account can't match. A money market account may require a higher opening deposit and higher minimum balance than a regular savings account at the same bank. But in return, the bank may pay a higher interest rate on the money market account. In addition, some money market accounts may offer checks that can access the account's funds, whereas traditional savings accounts do not.

Is a money market deposit account right for you?

Generally speaking, a good candidate for a money market account will likely have a relatively higher level of funds to deposit. That said, it's key that consumers carefully review the terms of both accounts to determine which suits them best. At many banks, the differences between a money market account and a savings account -- including the gap in interest rates -- may not be that substantial.

Online money market rate comparisons, such as the one on MoneyRates.com's money market account page, are a great way to search for higher rates and learn the details on specific money market accounts.

Traditional savings account vs. money market savings account

A traditional savings account, meanwhile, may require a lower opening deposit and monthly minimum balance requirement. But the account may pay a lower yield than its money market counterparts, and it will not offer checks.

Lately, traditional savings accounts have become somewhat less tradition-bound. High-yield savings accounts, which pay higher interest rates than traditional accounts, are one example. In some cases, a high interest savings account, which is often found at online banks, may meet or exceed the rates offered by a comparable money market savings account.

A chart comparing money market accounts vs. savings accounts and what is a money market account rate compared to savings account rates
*Source for national interest rate: FDIC, updated August 15, 2016

By reducing the service costs associated with traditional savings accounts -- your ability to go talk to a teller in person, for instance -- many online banks can pay higher interest rates and more convenience while still making a profit on their end. But thankfully, these new products have not changed the fundamental appeal of a traditional savings account that has FDIC insurance coverage: guaranteed interest, excellent security and good liquidity.

Making your best financial choice for deposits

Whether you are saving for retirement, college expenses or some other goal, a savings or money market account may have a place in your financial strategy. Deciding which account suits you is a matter of doing your research and choosing the account that best fits your needs.

Compare current rates and terms on savings on the savings accounts or money market accounts pages.

Your responses to ‘Money market accounts vs. savings accounts’

Showing 5 comments | Add your comment
Eva

22 May 2016 at 2:13 pm

Very helpful. Simple explanation that I could understand and base a decision on without having to do further research.

kyle lieff

14 October 2015 at 9:47 am

this was vary helpful

Jean

30 November 2011 at 3:31 am

very helpful, thank you

Ian S.

10 September 2011 at 8:51 pm

Thanks for this simple comparison. Succinct and informative

Linda G.

19 August 2011 at 6:06 am

Thank You for taking your time to publish this. It helped me to a better understanding. Sincerely, Linda G..

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