Money Market Account Vs Savings Account: A Detailed Summary

Credit unions and banks offer multiple options to their clients for saving their money. Some of these opinions give you immediate access to your funds while you keep paying interest. For the ones that save money, storing your money in a money market account or a savings account is the most sensible decision.

However, for a regular person, it is not always possible to know the differences between a typical money market account and vs savings account. Yes, banks would make you understand if you approach them, but then, isn’t that too much work?

So, if you want a quick solution to your problem, you are here at the right place. In this article, I shall take you through all the significant differences between a money market account and vs savings account and let you figure out which one suits your needs the best.

So, let us not waste any more time and get started!

Key Takeaways

Money market account vs. savings account is quite similar. They are both here for deposits and pay you interest.

A savings account mainly stores cash for a short time period and to meet the short-term ends. A savings account provides an average rate of interest.

Banks may use the money stored in savings accounts to grant loans to other consumers through lines of credit, car loans, or credit cards.

The rate of interest that a money market account pays is a little higher compared to a savings account. This is because the banks invest in highly liquid, short-term, and low-risk assets through these funds.

Also, money market funds do not come with any minimum account balance regulations.

What Is A Savings Account?

An account that a bank or a credit union maintains, which earns you interest on your balance, is known as a savings account. While a regular savings account will not offer you a high rate of interest, you can easily choose a high-yielding savings account that will help you fetch a much better interest on your principal.

Pros Of A Savings Account

You do not have to pay any minimum deposit balance or maintain a minimum balance to get access to a savings account.

A savings account is liquid.

Making withdrawals or deposits is an easy process.

You will get an ATM card when you open a savings account.

Each depositor may get their balance insured up to $250,00. The insurance is provided by the Federal Deposit Insurance Corporation if the money is in the bank or by the National Credit Union Administration in the case of credit unions.

Cons Of A Savings Account

Savers usually do not get the highest interest rates.

There is a chance that the bank or the credit union might charge you a fee for your account.

The financial might put a limit on the number of withdrawals a user can make.

Taxes are due on the interest that you may earn.

What Are Money Market Accounts?

A money market account, in simple terms, is a combination of the check-writing capacity of a typical checking account and the high rates of interest of a high-yield savings account.

These accounts, in general, have a higher rate of interest as compared to every other high-yield savings account, but they may come with more restrictions.

Pros Of A Money Market Account

You get a higher rate of interest than a typical savings account.

Balances within $250,000 get insurance from the Federal Deposit Insurance Corporation if the account is in a bank. In the case of a credit union, the same insurance is provided by the National Credit Union Administration.

Users may get a debit card as well.

You get check-writing privileges with a money market account.

Cons Of A Money Market Account

They come with a minimum deposit account, which may go as high as $5,000.

Whichever financial institution you choose to store the money may charge you a monthly fee for maintenance.

You may have to pay insurance on the interest you earn.

The bank or the credit union may limit the number of withdrawals that you get to make.

Money Market Account vs. Savings Account

Well, no, what you know in detail is what a money market vs. savings account is; let us now understand the differences between savings and money market accounts.

Most banks, be it your traditional brick-and-mortar or the newest online institutions, are entitled to offer both money market accounts and savings accounts to their customers.

At first, you may think both the accounts are the same. And why now? They are both depositing accounts that pay you interest, and the Federal Deposit Insurance Corporation protects them.

The purpose of both of these accounts is to save money for long or short time periods rather than spending it on a regular basis. The number of withdrawals each month may also be limited under the federal laws.

Before 24 April 2020, savings account holders were only allowed six withdrawals or transfers each month as per the stipulations by the Federal Reserve’s Regulation D. If the number of withdrawals exceeded the given limit, the account would have to pay a penalty.

While this limitation may exist no more, there are mentionable financial institutions that still place a limit on the withdrawal allowance each month.

How To Make A Choice Between Money Market Account Vs Savings Account?

The good news is you don’t have to make a choice between savings and money market accounts. You can quickly get access to both; multiple banks offer their customers the ability to open both accounts at the same time.

For instance, you may open a savings account to set some funds aside for specific goals, like a small vacation or a downpayment for a car. At the same time, you can also open a money market account that you can use to pay bills or write checks.

However, if you still want to make a choice between both, here are some of the factors that you might want to consider:

Decide What You Are Saving The Money For

The very first step is to start by deciding what you are saving the money for. You may want to save funds to grow an emergency fund or save for the downpayment of a car that you have been meaning to buy for the longest time or for a well-planned vacation. Once you are clear with the purpose of the money, you need to go through the pros and cons of each of the accounts to decide which ones serve the best for your needs.

You might need a typical savings account if you are saving money to use it later.

A money market account is also a preferred option for saving money for designated goals. However, a money market account comes with bill paying and cash writing facilities; therefore, you may consider it to be more of a transactional account.

These types of accounts come in handy for a bill or two occasionally, but you must not be tempted to make unwanted purchases using a debit card or a check. For that, it is always best to stick with the regular savings account.

Compare Between The Rates And Fees

Once you decide the purpose of saving money in a money market account vs. a savings account, you may think that the job is done. But it is fairly not the case.

Once you are done deciding the purpose of your money, it is time that you go bank hunting. You need to take an overall look over the rate and fee schedule disclosure of banks or credit unions to get more information about a certain account. You may find the competitive rate of interest.

A typical money market account comes with a higher minimum deposit and balance criteria, so you might want to consider if it will be possible for you to deposit the required amount to open an account.

It is also not just about opening the account; you will also have to think if you are capable of maintaining the same to keep the account operational.

Money market accounts might also feature tiered interest rates depending on the balance amount, which pays higher yields for higher balance benchmarks.

Open The Desired Account

Whether you are opening a money market account or a savings account, you will need some amount of basic information on each of the individual types.

While applying for either of the accounts, you will need a –

An identity proof that is issued by the government
Your birth date proof
Your Social Security Number
Your address and contact information

You will have to make at least a minimum payment to be able to open a money market or a savings account. You will also need the bank account number and the routing number of the account that you will use to send the money from.

Look Out For The Fees

Some money market and savings accounts may charge a monthly maintenance fee if you fail to meet specific criteria that the bank has set. These criteria may include having a minimum account balance or receiving at least one deposit in a month.

Therefore, you have to make sure that you are following the requirements of the account to

avoid any monthly fees that may cut into the savings that you wish to grow.

An even better option is to find a bank that does not even charge any monthly fees.

Most money market and savings accounts were limited to only six withdrawals or transfers in a month; however, this condition was lifted by banks after the ruling by the Federal Reserve.

However, you would still need to check in with your bank to confirm what withdrawal limits they practice so that you don’t end up exceeding them, for then, you might have to pay limit-exceeding penalties.

Alternatives Of Money Market Accounts And Savings Accounts

If you do not wish to invest in either of the mentioned accounts, there are two solid alternatives that you might want to choose from.

The two alternatives namely are:

U.S Treasury Bonds
Certificates of Deposits or CDs

They may yield a higher payout due to the higher rate of interest they offer.

The caution, however, is that you will have to commit to keeping the money away for a fixed time period, which can extend from three months to over a year when it comes to CDs.

Treasury bonds pay a designated rate of interest every half a year and take over 20 to 3 years to mature.

However, you can sell the bonds before their maturity period if you need to.

Frequently Asked Questions!! (FAQs)

Q1. How To Find Out If A Financial Institution Will Charge A Fee Or Not?

Ans. Well, you can simply ask your financial institution – bank or credit union to clear your doubt about the fees. You may also read the documents carefully, especially the fine-printed lines, before you finally sign over the dotted lines.

Q2. How Do I Track The Rate Of Interest On My Account?

Ans. All you need to do is call up the financial institution and ask them about the interest details that they are providing. Also, you must keep an eye on what decisions the Federal Reserve is making.

Q3. Where To Find A Good Money Market Account?

Ans. Some of the best institutions for opening a money market account are Quontic, CIT, and US Bank.

The Bottom Line

During a time when the economic conditions are uncertain, it may be more crucial than ever to have funds in a liquid account that will earn you interest, like a money market account or a savings account. The factors that you would want to consider while choosing between a money market account or vs savings account may include the minimum deposit criteria and the APY, along with its ability to pay bills and write checks.

Once you have set a few goals, it will become a lot easier for you to determine which one you want to choose between a money market account or vs savings account.

Thank you for staying with me for this long. I am hoping this article was insightful and catered to all your requirements. Please leave a comment if you want to add anything else!

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upasana sarbajna

Upasana is a budding journalist who has a keen interest in writing. She considers writing as therapeutic and is most confident when she writes. She is passionate about music, movies and fashion. She writes in a way that connects with the audience in a personal level. She is optimistic, fun loving and opinionated.

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Money Market Account Vs Savings Account: A Detailed Summary

Key Takeaways