Money Market vs Savings

Savings and money market accounts are both FDIC insured bank accounts. So what's the difference? Learn the pros and cons and find out which is best for you.

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• Money Market and Savings Accounts Overview
  
• Comparison Chart
  
• What is a Savings Account
  
• What is a Money Market Account
  
• Is a Money Market Account Better Than a Savings Account
  
• Which One is Right For Me
  
• Best Money Market and Savings Accounts

Money Market and Savings Accounts Overview

Having a savings account is an important part of personal finance management. It's a risk-free place to store your money for things like an emergency fund and short term goals.

When you open a savings account at a bank, you have 2 options: a traditional savings accounts or something called a money market account (MMA).

They are very similar with some differences in their use. Here are some common features of both :

• Offer interest to help grow your savings
  
• Limited to 6 withdrawals or transfers per month
  
• No limit to number of deposits you can make
  
• FDIC insured (up to $250,000 per depositor per bank)

Now let's take a look at each one in more detail and how they are different.

Comparison Chart

Here's a money market account vs savings comparison chart to understand the main differences:

What is a Savings Account

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A savings account is a secure place to park your money and let them grow over time. Unlike a checking account, it's intended as a place to save money you don't need in the immediate future, so you shouldn't be always touching your funds. Some banks will require a minimum balance (or else there's a monthly service charge).

Often, savings accounts offer interest to help your money grow. The rate will vary by each financial institution. Online savings accounts usually give the highest rates.

Since you're supposed to be saving money, you're limited to only 6 withdrawals or transfers each month. If you exceed that amount, a penalty will apply.

A savings account makes a great partner to a checking account. It can be used for overdraft protection in case you accidentally overdraw your checking.

What is a Money Market Account

A money market account is like a hybrid savings and checking account. You're still limited to 6 withdrawals a months, however, you get a little more flexibility and easier access to your money.

A lot of money market accounts allow for checkwriting and online bill pay (which is not allowed in in traditional savings accounts). Some even come with a debit card you can use for purchases and withdrawing money at ATMs. This makes your funds more liquid. You'll have to check what features your MMA offers.

MMAs may offer higher interest rates than savings accounts. However, in exchange, some banks will have bigger account balance and/or minimum deposit requirements. Again, rates and requirements will vary. Check out the best money market rates.

Is a Money Market Account Better Than a Savings Account

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Both are good options for saving money. The right type of account for you depends on what you're looking for and your financial situation.

A money market account offers the best of both worlds with more flexibility and higher interest rates. However, the minimum balance may be higher too. So if you're just starting out to save and can't maintain the required balance, it won't be the best choice for you.

Also because of the freer access to your funds, it makes it all too convenient to spend the money in your account. So if your primary goal is to SAVE money, you may want to remove those temptations by going with a traditional savings account. Instead, choose a high-yield savings account if you want similarly high interest rates.

But remember - both accounts only allow up to 6 withdrawals and transfers per month. Both are not meant to be used as an everyday banking account for your daily needs.

Is a Money Market or Savings Account Right for Me?

A money market account is best if you:

• Have a bigger amount of money to deposit
  
• Want easier access, like debit cards and checkwriting
  
• Want better interest rates in exchange for bigger balance

A traditional savings account is best if you:

• Are just starting to save or don't have a lot to deposit
  
• Are focused on saving money

Hear from an Expert

CreditDonkey asked JP Krahel from Loyola University Maryland for his expert opinion on money market accounts vs savings accounts.

Here's what he had to say:

Best Savings Accounts

Member FDIC
HSBC Direct Savings - 0.15% APY
Click Here to Get Deal
• Earn 0.15% APY on all balance tiers
• No monthly maintenance fee
• Minimum balance to open account is $1
• Member FDIC

HSBC Direct's online savings account offers one of the currently highest APYs on the market. Only $1 to open and there is no service charge.

Member FDIC
CIT Savings Builder - Earn 0.45% APY
Click Here to Learn More
Earn up to 0.45% APY. Here's how it works: Maintain a minimum balance of $25k OR make at least a $100 minimum deposit every month. Member FDIC

CIT Bank's Savings Builder account encourages you to save money by rewarding active savers with a better interest rate. To receive the top-tier APY, you need to open the account with $100 initial deposit, and deposit at least $100 every month (which is reasonable to meet). There is no service fee.

High Yield Savings - 0.60% APY

Click Here to Get Deal

$0 minimum opening deposit. No minimum balance requirement. No fees to open or maintain account.

Synchrony's High-Yield Savings offers an ATM card for withdrawing money. There is no minimum deposit and no service charge.

Online Savings Account - 0.50% APY
Click Here to Get Deal
$0 minimum opening deposit. No minimum balance requirement. No fees to open or maintain account.

Ally Bank gets very high satisfaction ratings with a user-friendly interface and live 24/7 customer service, It's a full-service online bank with a wide ATM network, free checking, multiple savings options, and investment services. No opening minimum or service fees.

Best Money Market Accounts

Member FDIC
CIT Bank Money Market Account - 0.50% APY
Click Here to Get Deal
• 0.50% APY
• $100 minimum opening deposit
• No monthly maintenance fee
• FDIC insured

CIT Bank offers a high rate on the Money Market Account no matter how much you have. However it doesn't come with an ATM card.

• Set up direct deposit
  
• People Pay account to account or through PayPal
  
• Remote check deposits via mobile app
  
• (Online bill pay coming soon)

Member FDIC
Money Market Account
Click Here to Get Deal
• Earn 0.35% APY for balances under $100,000
• Earn 0.40% APY for balances $100,000 and over

Discover Bank's Money Market Account provides free access to your funds via ATMs.

• Free debit card and checks
  
• Over 60,000 fee-free Allpoint® or MoneyPass® ATMs
  
• No limits on ATM cash withdrawals
  
• Remote deposits and online bill pay
  
• No deposited item returned or insufficient funds fees

UFB Premium Money Market - Earn 0.20%
Click Here to Get Deal
• Earn 0.20% APY on balances of $25,000 and above
• Member FDIC

UFB Direct's Premium Money Market Account has a high rate, but only on accounts with $25,000 or more.

• $5,000 to open
  
• Complimentary Visa debit card
  
• Check writing privileges
  
• Mobile check deposits

Bottom Line

Both money market accounts and savings accounts are excellent—and safe—deposit accounts to save your money.

The main difference between a money market account and savings account is how you access your funds. Some money market accounts offer increased flexibility by allowing for checkwriting or debit card use. They also may have higher interest rates, but may also require higher account minimums.

Remember: Rates and features vary by bank. Take some time to research the best place for your money.