Money Market vs. Savings Accounts: Which Is Right for You?

When interest rates are high, many people rethink where they keep their short- and medium-term savings. Earning compound interest while keeping your money in a safe account is a win-win, and you can set up automatic deposits or transfers to tackle your financial goals. However, you'll want to consider what type of account you'll use for your savings.

Below, we dive into some key differences between two popular types of savings accounts: money markets and traditional savings.

Money Market vs. Savings Accounts

Money market accounts and savings accounts are two types of savings deposit accounts.¹ You might be able to find either one from a traditional bank, online bank or credit union, and both types of accounts tend to offer higher interest rates than checking accounts.

Here's a closer look at some of the similarities and differences:

	Money Market account	Savings Account
FDIC or NCUA insurance	Yes	Yes
Earn interest	Yes, sometimes with tiered interest rates	Yes
Write checks	Yes	No
Receive a debit card	Yes	No, but sometimes an ATM card
Minimum opening and monthly balance requirements	Generally higher than a savings account	Generally lower than a money market account

 

Deposit insurance

Both money market accounts and savings accounts are covered by FDIC insurance (for bank accounts) or NCUA insurance (for credit union accounts) if the financial institution is part of the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA)—which most are. The insurance covers up to $250,000 per depositer, per ownership category, per insured financial institution and will make you whole if the bank or credit union fails.²

Accessing your account

The primary difference between money market and savings accounts is that money market accounts often come with checks or a debit card that you can use to easily access the funds in your account. Savings accounts typically don't come with either of these; but some savings accounts, including Synchrony Bank's high yield savings account, have an ATM card you can use to withdraw cash from ATMs.

As savings deposit accounts, money market accounts and savings accounts are subject to Regulation D. The law previously limited you to six convenient transfers from accounts each month. But, in response to the pandemic, the Federal Reserve amended Reg D, allowing (but not requiring) financial institutions to suspend the six-transfer limit.³

Even if a financial institution chooses to keep the six-monthly withdrawal limit (Synchrony Bank does not), you can always make as many withdrawals as you want in person, by mail, at an ATM or by requesting a check by phone.

Minimum opening balance

Some money market accounts and savings accounts require you to deposit at least a minimum amount of money to open the account. Money market accounts tend to have higher minimums—sometimes in the tens of thousands of dollars.

Interest rates and balance requirements

Money market accounts tend to offer higher interest rates than savings accounts, especially from traditional banks and credit unions.⁴ However, they might also have higher monthly balance requirements. The interest rates could also be tiered, meaning the interest rate you receive depends on how much money you keep in the account.

But these generalities don't always hold up. Online money market accounts may have low or no balance requirements, and some money market accounts have lower interest rates than high yield savings accounts from the same financial institution. And if you compare options more broadly, you might even find checking accounts that offer easy access with higher interest rates.

Pros and Cons of Money Market Accounts

It's worth considering the general pros and cons of money market accounts if you're setting savings goals and looking for someplace safe to keep your money.

Pros

• • Can be covered by FDIC or NCUA insurance
• • Potentially offers a higher interest rate than a checking or savings account
• • Offers convenient access to the money in your account using checks or a debit card

Cons

• • May require high balances to receive the best interest rates
• • Could have high opening and monthly balance requirements
• • Potentially limits you to six convenient fee-free withdrawals each month

Pros and Cons of Savings Accounts

You can alternatively use high yield savings accounts, which have similar pros and cons.

Pros

• • Can be covered by FDIC or NCUA insurance
• • Potentially offers a higher interest rate than a checking account, and sometimes more than a money market account
• • May offer easy online transfers or come with an ATM card

Cons

• • May not offer easy access to your money
• • Could offer a lower interest rate than some money market accounts
• • Potentially limits you to six convenient fee-free withdrawals each month

Which Type of Account Is Best?

Money market and savings accounts can be good options if you're looking for someplace safe to keep the money you're setting aside for your financial goals. And if you have an automated savings plan and high yield account, you might be able to amass the money you need faster than you would with a checking account.

The pros and cons of each account type can be important to consider, but they are generalizations. It's best to think through your particular situation, preferences and current account offerings.

For example, writing checks or using a debit card are only benefits if you want easy access to your money. But if you tend to make impulse purchases, you might want to make it more difficult to quickly spend your savings, which means a money market account won't necessarily be a good fit.

Savings accounts also might not be the best fit for every financial goal. If you have long-term goals, such as retirement, investing within a tax-advantaged retirement account might make more sense. Or, if you have medium-term goals and know you won't need the money right away, a certificate of deposit (CD) is another safe option that could offer even higher interest rates.

Synchrony Breaks the Mold

Comparing specific accounts' features and fees is important because some savings accounts and money market accounts don't follow the general rules of thumb.

The Synchrony Bank money market account doesn't have any minimum or ongoing balance requirements, and you can write checks with your account. The Synchrony Bank high yield savings account also doesn't have balance requirements, and it offers an even higher interest rate than the money market account.

Either account can help you achieve your financial goals—the choice is yours!

 

Louis DeNicola is a freelance writer based in Oakland, California, who specializes in consumer credit, finance and fraud. He works with lenders, credit bureaus, Fortune 500s and fintech startups to help organizations share their story and consumers save money. Outside of work, you can find Louis at his local climbing gym or cooking up a storm in the kitchen.

 

READ MORE: 3 Strategies to Create Realistic Savings Goals

 

Sources/references

1. Regulation D Reserve Requirements. Federal Reserve. Published November 2011.

2. What is a money market account? Consumer Financial Protection Bureau. Reviewed April 26, 2023.

3. Federal Reserve Board announces interim final rule to delete the six-per-month limit on convenient transfers from the "savings deposit" definition in Regulation D. Federal Reserve

4. National Rates and Rate Caps. FDIC. Updated May 15, 2023.