November 22, 2018

Money Market vs Savings

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Money market and savings accounts are easy to open and FDIC-insured but they are NOT the same. Learn the key pros and cons and find out which one is worth it.

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Banks offer two types of deposit accounts for customers looking to save AND have everyday access to their money.

Tip: If you've got a chunk of money you don't mind putting away for a while, consider a Certificate of Deposit. CD terms range from three months to several years. The longer the term, the higher the interest rate. Check out our top picks.

Both money market and savings accounts are:

  • Easy to open: You'll need only a few minutes—and some personal documents—to start either account in person or online.
  • Interest-bearing: Your money will make money with both types of accounts.
  • FDIC-insured: Your deposits are insured (up to $250,000 per depositor) in either a money market or savings account. That means you WON'T lose your money in the unlikely event your bank closes.
  • Withdrawal restricted: Under federal law, you're only allowed 6 withdrawals or transfers per month for both types of accounts. Additional withdrawals are subject to fees.

How Money Market and Savings Accounts Differ

Money market and savings accounts may be similar, but they aren't identical. Check out these important differences.

Money market accounts are considered "high-yield" savings accounts, which means they typically offer slightly better interest rates. But these rates may be tied to your account balance.

Tip: With money market AND savings accounts, interest rates can vary significantly by bank. You'll typically find higher rates with online banks, since they don't have the overhead costs of traditional brick-and-mortar institutions.

Some money market accounts also have features normally associated with checking accounts. These include a debit-card and check-writing capabilities.

Savings accounts may have lower interest rates but they also tend to have lower opening deposit requirements AND monthly balance minimums.

Unlike some money market accounts, you WON'T get a debit card or checks with a savings account. Some banks do offer a bank card for ATM withdrawals, however.

Did You Know: The average APY for a money market account is 0.15%, according to the FDIC. Savings accounts have an average interest rate of 0.08%.

Now that you know the basics, it's time to pick the right account for you. Keep reading for some points to consider before making your choice.

Is a Money Market or Savings Account Right for Me?

Here are some questions to answer before choosing an account.

Do you have a significant amount of money to deposit?
If so, consider a money market account. You'll likely get the best interest rates, which means a higher return for your balance.

Do you want more ways to access your money?
If flexibility is a priority, then a money market account is the best choice. You'll often get a debit card and sometimes even checks through your bank.

Are you're just starting to save?
If so, opt for a traditional savings account. You can always transfer to a money market account once you've beefed up your balance.

Bottom Line

Both money market and savings accounts are excellent—and safe—ways to save your money. While money market accounts may offer slightly higher rates and increased flexibility, they sometimes have restrictions that savings accounts don't.

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

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