- A money market account is a deposit account that allows you to write checks or withdraw funds with a debit card.
- Traditional savings accounts have limited features, but they’re one of the easiest accounts to manage.
- High-yield accounts have higher annual percentage yields than standard accounts, making it easier to grow your balances.
- Your financial institution may charge a fee if you make more than six withdrawals a month.
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On This Page
- Key Takeaways
- What is a money market account?
- Our top picks for savings accounts
- What is a savings account?
- Money market account vs. savings account
- Similarities between money markets and savings accounts
- Differences between money markets and savings accounts
- How to choose between a money market account and a savings account
- When should I get a money market account?
- When should I get a savings account?
- How to open a money market or savings account
- Compare money market accounts
- FAQ: Money market vs. savings account
- Related topics
On This Page
- Key Takeaways
- What is a money market account?
- Our top picks for savings accounts
- What is a savings account?
- Money market account vs. savings account
- Similarities between money markets and savings accounts
- Differences between money markets and savings accounts
- How to choose between a money market account and a savings account
- When should I get a money market account?
- When should I get a savings account?
- How to open a money market or savings account
- Compare money market accounts
- FAQ: Money market vs. savings account
- Related topics
Money Market vs. Savings Account
Leigh Morgan - Personal Finance
+ 1 other
Reviewed By
Blake Esken - Los Angeles Times
What is a money market account?
A money market account is a deposit account offering higher rates than a traditional savings account. Once you make your initial deposit, you can add money at any time, making it easier to grow your balance. You also earn interest on your deposits.
How do money market accounts work?
Money market accounts work like other types of bank accounts. You can deposit cash, checks, transfer funds from checking or take advantage of other deposit methods. You also get a debit card or check-writing privileges, allowing you to access your funds quickly. Note that some money market accounts have withdrawal limits. If you exceed the limit, you may have to pay a fee.
Generally, money market accounts are ideal for individuals with short-term savings goals.
Standard money market vs. high-yield money market
A high-yield money market account has a higher annual percentage yield (APY) than a standard account. This enables you to earn more interest on your balance.
For example, if you put $10,000 in a money market account with an average APY of 0.66%, you’ll earn approximately $66 in one year. If you invest this money in a high-yield money market account with a 4% APY, you’ll earn around $400.
Several banks offer high-yield money market accounts with APYs of 4% or higher, including U.S. Bank, Quontic and EverBank.
Best high-yield money market accounts:
- Hanover Bank - Money market deposit account with an APY of 5.27%
- Ponce Bank - High-yield money market deposit account with an APY of 5.26%
- American First - Money market deposit account with an APY of 5.24%
- Quontic - Money market account with an APY of 5.00%
Pros and cons of money market accounts
The table below lists some pros and cons of money market accounts.
Pros
- Higher interest rates than standard savings accounts
- Usually insured by the Federal Deposit Insurance Corporation (FDIC)
- Funds are immediately accessible rather than tied up in investments
Cons
- May have high minimum deposit/balance requirements
- Some banks have limits on the number of withdrawals made per month
Featured high-yield money market account:
Key Select Money Market Savings® Account
Why we like it
Key Select Money Market Savings® Account is a great option for those seeking convenient banking and can maintain a minimum balance of $25,000 at all times. By keeping a balance of $25,000 to $1,999,999.99 and bringing at least $25,000 from outside of KeyBank, you can earn a 4.00%-4.50%* interest rate for six months.
An overview
| APY | Minimum deposit | Monthly fee |
|---|---|---|
| 4.00-4.50%* (2.41%-2.92% blended APY) | $5,000 | $20, waived with a daily $25,000+ balance or KeyBank consumer relationship package checking |
*Figures are dependent on location and are accurate as of July 2024.
What is a savings account?
A traditional savings account is a deposit account designed to hold funds you don’t need right away. For example, if you want to save up for a new car, you can deposit money in a savings account every month until you have enough for a down payment.
Savings accounts are ideal for consumers who want to grow their savings without taking big risks. Opening a savings account is also a great way to change your spending habits. If you set aside money in a separate account, you may be less likely to spend it when you’re out shopping or browsing the web.
Using our savings calculator can help you see how your money could grow over time in a savings account.
How do savings accounts work?
Savings accounts work by making deposits as often as you like into an account which will then earn interest. Some people take cash to a local bank branch, while others transfer funds from their checking accounts. You may even be able to set up automatic transfers from your paycheck.
When you want to withdraw funds, you can go to a local branch, transfer money to another account or use your ATM card to get cash.
In 2020, the Federal Reserve Board revoked the rule requiring banks to charge a fee for more than six savings account withdrawals per month. However, some banks still have limits on the number of fee-free withdrawals you can make each month, so review the terms of your account carefully.
Standard savings vs. high-yield savings
A high-yield savings account has a much higher APY than a standard savings account. The national average savings APY was just 0.45%, according to the FDIC. In contrast, the best rates for high-yield savings accounts range from 4.25% at Capital One to 5.24% at Western Alliance.
Pros and cons of savings accounts
Savings accounts have a few advantages and disadvantages you should know about.
Pros
- Relatively risk-free
- Insured by the FDIC or the National Credit Union Administration (for accounts at credit unions)
- Easy access to your funds
Cons
- Some banks have minimum balance requirements
- Variable interest rates
- You may have to pay a monthly service fee
Money market account vs. savings account
The table below compares the features of a standard or high-yield savings account vs. a money market account:
| Minimum deposit | Some banks have minimum deposit requirements. | Some banks have minimum deposit requirements. |
|---|---|---|
| Minimum balance | You may be required to maintain a minimum balance. | You may be required to maintain a minimum balance. |
| Earns interest | Earns interest at a variable rate that’s usually higher than the rate on a standard savings account | Earns interest at a variable rate that’s usually lower than the rate on a money market account |
| Transfers and withdrawals | Limit of six transfers per month at some banks | Limit of six transfers per month at some banks |
| FDIC insured | Insured for up to $250,000 per depositor, per bank | Insured for up to $250,000 per depositor, per bank |
| Debit cards | Yes | No; some banks offer ATM cards |
| Check-writing | Yes | No |
Similarities between money markets and savings accounts
When comparing money market account vs. savings account features, you’ll notice a few similarities:
- Interest earnings: Both standard savings accounts and money market accounts earn interest, giving your balance a boost.
- Variable rates: Some financial products come with fixed interest rates, which means your rate never changes. Savings and money market accounts both have variable rates, so your APY may increase or decrease based on market conditions.
- Withdrawal limits: The Federal Reserve Board eliminated the rule requiring financial institutions to charge customers for more than six savings withdrawals per month. Some banks decided to keep their limits in place, so you may have to pay a fee if you make more than six withdrawals per month from a savings account or a money market account.
- Accessibility: Many financial institutions offer both savings accounts and money market accounts, making it easy to get your finances on track. You may even be able to open one of these accounts online.
Differences between money markets and savings accounts
When you compare money market vs. savings accounts, you also need to be aware of the differences:
- Debit cards: Savings accounts don’t come with debit cards. Your bank may issue an ATM card to make your funds more accessible, but you won’t be able to swipe your card at grocery stores and other merchants. In contrast, many money market accounts come with a debit card.
- Check-writing privileges: You can’t write checks against the balance in your savings account, but a money market account typically comes with check-writing privileges, giving you more flexibility.
How to choose between a money market account and a savings account
Before you open a savings account or a money market account, consider the following:
- Fees: Your bank may charge monthly service fees for each type of account. If you’re concerned with preserving as much of your balance as possible, choose the account with the lowest fees.
- Rates: The purpose of these accounts is to maximize your savings. If you want to accelerate your earnings, choose an account with a high APY.
- Withdrawal limits: Some banks still charge a fee for more than six withdrawals per month. If you think you’ll need frequent access to your funds, look for a bank that no longer charges this fee.
- Minimum deposit requirements: Some banks have high minimum deposit requirements. For example, you may need to deposit $1,000 to open a money market account. If you have a small amount of money, look for a bank with low minimum deposit requirements.
When should I get a money market account?
You should get a money market when you have enough cash on hand to meet the minimum deposit requirement. A money market account may be right for you if you’re concerned about accessing your funds. This type of account allows you to write checks or use a debit card, enhancing accessibility.
When should I get a savings account?
You should get a savings account as soon as you have enough money to meet the minimum deposit requirement at your preferred bank. If your bank doesn’t have a minimum deposit requirement, you can open a savings account at any time — the earlier, the better.
How to open a money market or savings account
To open a money market or savings account, follow these steps:
Choose a bank.
Review the account terms carefully.
Fill out the application. You may be required to provide ID and proof of residence.
Make your initial deposit.
Add funds whenever you can.
Compare money market accounts
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FAQ: Money market vs. savings account
Is a money market better than a savings account?
One account isn’t better than the other. Both types of accounts have features designed to help you save money.
Is a money market account a savings account?
Money market accounts are similar to savings accounts, but they’re not exactly the same.
What is the downside of a money market account?
A money market account may have a high minimum deposit requirement. Some banks also charge fees for more than six withdrawals per month.
Do you pay taxes on money market accounts?
Yes, interest is treated as income, therefore you have to pay taxes on savings account interest earnings.
Are savings accounts safer than money markets?
Money markets are just as safe as traditional savings accounts. Both are insured by the FDIC to give you extra peace of mind.
Are money market accounts FDIC-insured?
Yes. Each account is insured for up to $250,000 per depositor, per bank.
Do money markets and savings accounts have different interest rates?
Yes. Money markets usually have higher rates than traditional savings accounts. You’ll earn even more if you open a high-yield money market account, which comes with a higher-than-average APY.
About the Author
Elizabeth Smith is an experienced travel and finance writer who specializes in topics including credit cards, travel insurance, and personal finance. Travel insurance, in particular, has both professional and personal significance for Smith. She’s traveled to 73 countries, and has extensive experience choosing and using various policies — she understands how valuable the right plan can be in an emergency, and loves to help readers find the perfect fit.
Smith comes to the world of finance from a scientific and technical background. She spent more than 10 years writing about engineering, science, and technology for universities and private companies. When she’s not writing or traveling, Smith can usually be found hiking or Nordic skiing.
About the Reviewer
Blake Esken has over 15 years of experience in product management and has been a member of the Los Angeles Times staff for over five years.
As part of his role at the Los Angeles Times Commerce Team, Blake acts as the in-house reviewer and fact checker for LA Times Compare. He supervises all content for compliance and accuracy and puts to use skills he has honed through years of experience managing high-stakes projects for a range of industry-leading companies.
He has a strong background in data analysis, compliance, and communication, which allows him to support LA Times Compare through fact-checking in an effort to provide up-to-date and factual information across our content.
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