Money market account vs. savings account: What’s the difference?

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Money market accounts and savings accounts are both financial products that allow you to save and withdraw cash.

  • A savings account is a financial product that allows you to deposit money and earn interest. They don’t come with checks or the ability to schedule bill payments.
  • A money market account is very similar to a savings account but offers some more transactional features. Money market accounts allow you to deposit cash and earn interest, but they also typically allow a limited number of checks and bill payments each month.
Savings account Money market account
Earns interest Yes Yes
ATM withdrawals Yes Yes
Unlimited withdrawals* No No
Check-writing No Yes
Automated deposits possible Yes Yes
FDIC/NCUA-insured Yes Yes

*The Federal Reserve issued an “interim final rule” to suspend Regulation D due to economic conditions from the pandemic. This gave banks the ability to let customers make more than the standard six maximum withdrawals and transfers each month. Check with your bank to clarify its withdrawal limit rules; many banks didn’t ease their policies despite the Fed ruling.

What is a savings account?

As an interest-earning deposit account, a savings account is similar to a money market account in that deposits aren’t limited but withdrawals may be — up to six per month. Savings accounts are a good place to save your money while still having it accessible if you need it later. The average interest rate on savings accounts is only 0.06 percent, according to Bankrate data as of early June, but the best savings accounts pay around 0.6 percent.

Savings accounts are a safe place to keep your savings. Like a money market account, they are insured through the Federal Deposit Insurance Corp. (FDIC) or National Credit Union Association (NCUA) up to $250,000 per account holder.

Pros and cons of savings accounts

Pros Cons
Interest-bearing Nominal interest earned
ATM withdrawals allowed May be limited to six withdrawals or transfers per month
FDIC/NCUA-insured Bill payments and check-writing not allowed

What is a money market account?

A money market account takes what works from a savings account, such as the ability to earn interest, and combines it with some features of a checking account, such as the ability to pay bills, make withdrawals and write checks. You can make unlimited deposits into your money market and even schedule automatic deposits.

A money market account, however, can’t fully replace a checking account. Federal law limits the number of withdrawals or transfers you may make each month to six. If you would like an interest-earning account that allows you to occasionally pay a bill or two, a money market account is a good option.

The average interest rate on money market accounts is 0.07 percent, according to Bankrate data from late July. However, the best money market accounts pay around 0.6 percent. You may find that money market accounts require a bigger deposit amount in order to open the account or earn the top APY. If you have a smaller amount to deposit, a savings account may be the better option.

Keep in mind that withdrawing and spending the funds is easier with a money market account than with a savings account. If you want to make it more difficult to spend the money, a savings account may help you remain more disciplined than a money market account.

Also note that money market accounts and money market mutual funds are not the same thing.

Pros and cons of money market accounts

Pros Cons
Interest-bearing Nominal interest earned
Bill payments and check-writing allowed May be limited to six withdrawals or transfers per month
ATM withdrawals allowed May require a sizable minimum deposit
FDIC/NCUA-insured

How to choose between a money market account and a savings account

You don’t have to choose between a money market account and a savings account — you can have both. For example, you could have a savings account where you deposit money for an upcoming trip or a down payment on a house and a money market account where you keep some money so you can write checks.

However, if you want to decide between a money market account and a savings account, here’s what to consider.

Determine what the money is for

First, determine the use of the funds. You may be interested in growing an emergency fund, saving for a down payment for a house or paying for a vacation. Once you know your purpose for the money, review the pros and cons of each product to determine which one is best for you. A savings account may be all you need if you’re simply saving money for later use. Money market accounts are also good options for saving money for specific goals. However, because they allow check-writing and bill payments, you may view this account as more of a transactional account.

Compare fees and rates

Take a look at a bank or credit union’s schedule of fees and rate disclosures to learn more about an account. You can find competitive interest rates on both savings accounts and money market accounts, so be sure to shop around.

Money market accounts may have higher minimum deposit and balance requirements, so consider whether you’ll be able to deposit enough money to open the account and maintain enough money to keep the account open.

Open the account

Whether you’re opening a savings account or money market account, you’ll need some basic information. For your application, you’ll need a government-issued ID, Social Security number, birthdate, address and contact information.

You may need to make a minimum deposit to open the savings account or money market account. You will need the routing number and bank account number for the account you will be sending funds from.

Watch for fees

Some savings and money market accounts may charge you a monthly maintenance fee if you don’t meet certain conditions such as having a minimum balance or receiving at least one deposit per month. Make sure you follow an account’s requirements to avoid monthly fees that can cut into growing your savings. Or even better, find a bank that doesn’t charge monthly fees.

Most savings and money market accounts are limited to six transfers or withdrawals per month, though your bank may have lifted this restriction after the Federal Reserve ruling. Remember to check with your bank to confirm an account’s withdrawal limits so you don’t exceed them, or you may be charged excess withdrawal fees.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a finance and business journalist who has been featured in Bankrate, Business Jet Traveler, MSN, CheatSheet.com, Freshome.com and TheSimpleDollar.com. She regularly travels to Africa and the Middle East to consult with women’s NGOs about small business development and works with select startups and women-owned businesses to provide growth and visibility.
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Reviewed by
Professor of finance, Creighton University