What Is the Difference Between a Money Market and Savings Account?

Money

Money market accounts and savings accounts can both be good options for savers who are looking for somewhere to stash their cash.

Both tend to offer higher returns than a bank account, which means you can earn more money on your savings.

Plus, neither type of account locks up your money like a certificate of deposit (CD), and you can easily make up to 6 withdrawals each month without worrying about fees.

However, there can be a few differences. Here’s a quick overview:

Money Market Account Savings Account
Minimum initial deposit requirement Could be as low as $0, but many accounts require a very large deposit Could be as low as $0, and few accounts require a very large deposit
Interest rates Could be higher than a bank or savings account Often higher than a bank account, can be as high as MMA
Funds can be guaranteed by the government Yes Yes
May come with a debit card and/or checks Yes No
Maximum fee-free withdrawals per month* 6 6

Source: https://www.depositaccounts.com/moneymarket/ ; https://www.depositaccounts.com/savings/

*Withdrawals at bank branches, by mail, phone-initiated, by check, and ATM withdrawals may not count against this limit. Source: https://www.federalreserve.gov/boarddocs/supmanual/cch/int_depos.pdf

Money market accounts (sometimes called money market savings accounts, money market deposit accounts, or MMAs) and savings accounts are both types of savings deposit accounts. That’s why FDIC insurance and withdrawal rules apply to either account type.

By contrast, money market mutual funds (sometimes simply called money market funds) are investment accounts that may not come with the same withdrawal limits or government insurance.

Three distinguishing factors

Banks and credit unions offer savings accounts and money market accounts and the terms, rates, and conditions can vary widely. As a result, it’s hard to say there are across-the-board rules that distinguish the two types of accounts.

For example, some savings accounts offer a higher interest rate than money market accounts, and you may be able to find either type of account without a minimum initial deposit. Likewise, both could have a monthly fee if you don’t maintain a certain balance.

The Varo Savings Account doesn’t have an initial deposit requirement or monthly fees and offers rates that rival MMA rates. You can learn more here.

When there are differences between savings accounts and MMAs, they tend to be around the interest rate, deposit amount, and how you can withdraw money. 

  1. Interest rates tend to be higher with money market accounts. Money market accounts can offer savers a high-interest rate, but it may depend on your account’s balance and scale as your balance increases. For example, a money market account may start with a lower rate but then step up significantly with a bigger balance. In some cases, you may also have to deposit a large amount of money to open an MMA.
  2. Deposit requirements may be lower with a savings account. When there is an initial deposit requirement or an ongoing balance requirement to avoid a monthly fee, money market accounts’ requirements may be higher. For example, you may need to keep an average daily balance of $2,500 to $10,000 in your money market account to avoid a monthly maintenance fee. A Varo Savings Account, for example, has no minimum balance requirement, however, you must have at least a $0.01 in the account to earn interest.
  3. Money market accounts may come with checks or debit cards. One distinguishing factor is that money market accounts sometimes come with checks or a debit card. As a result, they can be a hybrid between checking and savings accounts. Although, even this isn’t always true, as some money market accounts don’t offer this feature.

Which type of account is best?

There may have once been a clear-cut distinction between money market accounts and savings accounts—money market accounts offered a higher interest rate and checks or a debit card, but in exchange, you had to keep more money in the account.

That’s increasingly no longer the case.

True, you might not get a debit card or book of checks (if the latter is even a concern), but with online high-yield savings accounts, you often get rates that are as competitive as a money market’s, and it’s often quick and easy to transfer money up to 6 times a month to a bank that has a debit card.

If you’re considering switching accounts or opening a new account, you may not want to start your search by filtering out money market or savings accounts. Instead, focus on what matters: the account’s fees, requirements, interest rate, and benefits. 

Louis DeNicola is a freelance personal finance writer and credit enthusiast. You can find him on Twitter @is_lou.