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Key takeaways
- A money market account often comes with features associated with a checking account such as a debit card or a checkbook, while a savings account does not typically offer those kinds of spending tools.
- High-yield savings accounts are often better choices than regular savings accounts when it comes to earning interest.
- If you can meet the minimum balance requirements for both, it can make sense to open a savings account and a money market account to distinguish between short-term and long-term savings objectives.
- While a money market account combines the features of a checking and savings account and is federally insured, a money market fund isn’t federally insured or regulated, and the funds are invested in a variety of low-risk, short-term securities that fluctuate in value.
Money market accounts and savings accounts are both financial products that allow you to save and withdraw cash. These types of deposit accounts provide easy access to your funds and may pay competitive yields, both of which can be important during periods of economic recession and inflation.
While savings accounts and money market accounts share some similar features, there are key differences in how you’re able to use them. Understanding the rules of each can help you decide which one is best for you.
Savings accounts vs. money market accounts
Both savings accounts and money market accounts allow you to deposit money and earn interest. Unlike savings accounts, however, money market accounts often come with transactional features — such as the ability to write a limited number of checks and make bill payments each month. Some money market accounts also come with a debit card.
The following chart breaks down which features may be provided with savings accounts and money market accounts:
| Savings account | Money market account | |
|---|---|---|
| Earns interest | Yes | Yes |
| ATM withdrawals | Yes | Yes |
| Unlimited withdrawals without excessive transaction fees* | No | No |
| Check-writing | No | Sometimes |
| Debit card | No | Sometimes |
| Automated deposits possible | Yes | Yes |
| FDIC/NCUA-insured | Yes | Yes |
*The Federal Reserve removed Regulation D withdrawal limitations in 2020 that banks had been required to impose on savings accounts. This allowed banks to let customers make more than the standard six maximum withdrawals and transfers each month without incurring any excessive transaction fees. Check with your bank to clarify its withdrawal limit rules; many banks didn’t ease their policies despite the Fed ruling.
Key statistics on savings accounts and money market accounts
- The national average annual percentage yield (APY) for savings accounts as of Jan. 20, 2025, is 0.54 percent. However, rates more than 10 times higher can be found at some online banks and credit unions.
- The national average yield for money market accounts is 0.40 percent as of Jan. 20. Rates more than 10 times higher can be found, however, by shopping around.
- More than half of savers (51 percent) have a savings or money market account with an online bank, according to Bankrate’s Saving Account Survey.
- The median balance for transactional accounts, such as savings accounts and money market accounts, is $8,000.
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, and many banks offer both options. For example, you could have a savings account to set aside money for goals, such as an upcoming trip or a down payment on a house, as well as a money market account where you keep some money so you can pay bills, use a debit card or 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’s for
Start by determining the use of the funds. You may be interested in growing an emergency fund, saving for a down payment on 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 often allow for check-writing and bill payments, you may view this account as more of a transactional account. This can come in handy for paying an occasional bill or two, but if you’d rather not be tempted to make unnecessary purchases using checks or a debit card, it might be best to stick with a savings account.
Compare interest rates
You can find competitive interest rates on both savings accounts and money market accounts, so be sure to shop around. Don’t just settle for a standard savings account, either. High-yield savings accounts are appropriately named: You’ll be able to earn better rates with these accounts.
Money market accounts may feature tiered rates based on the balance amount, paying higher yields for higher balance thresholds. Be sure to read the fine print and weigh how much you expect to keep in the account against whether you’ll be eligible for the best rates the bank or credit union is offering.
Watch out 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. These fees aren’t typically advertised, either, so you’ll need to read the account disclosure or the FAQs to get a full picture of the bank’s fee structure.
Pros and cons of savings accounts
Pros
Cons
- Some banks pay nominal interest rates of just 0.01 percent
- Withdrawals may be limited to a certain amount before paying a fee
- Some banks have minimum balance requirements to avoid monthly fees
Despite any potential downsides associated with certain savings accounts, it’s critical to have some type of account designed for planning for the future and setting aside money for potential emergencies.
Pros and cons of money market accounts
Pros
- Competitive APYs available
- Flexibility to make payments with some including a debit card and/or a checkbook
- FDIC/NCUA insurance if at an insured bank or credit union
Cons
- May require higher balance to earn the best rate
- Number of monthly transactions may be limited
- Easy access to funds can work against you if you’re aiming to limit spending
While there are some unique drawbacks to certain money market account offerings, plenty of depositors opt to have a money market account alongside a savings account for the ability to earn extra interest while paying bills and using a debit card.
Bottom line
Both savings and money market accounts are great tools for any type of economic environment, but they’re even more valuable in today’s high-rate climate. As you work to make sure that you preserve your purchasing power, the best high-yield savings accounts and money market accounts are strong tools to fight inflation. Consider the APY, minimum balance requirements and fees as you look at different options.
Once you’ve defined your goals and gotten on track with a high-yield savings account or a money market account — or both — it’s a great time to also focus on building retirement savings or pursuing other investments.
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