Money Market vs. Savings Account

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Everyone needs a place where they can store their cash and still maintain access. For many people, that’s a savings account, which is one of the most popularly held accounts in America. However, there are other savings options, including money market accounts, which allow you to grow your money in a safe and accessible way, and come with other benefits.

Money market accounts share similarities to both savings and checking accounts. They come with a higher interest rate like the former, but they can have check-writing capabilities like the latter, among other things. There are also several differences between these options which may make one more preferable than the other, based on your situation. So, as you consider money market vs. savings accounts, and wonder which is right for you, consider these key points.

What is a savings account?

A savings account is one type of savings vehicle offered by financial institutions, where you can secure your money and earn interest, whether fixed or variable. These types of accounts aren’t meant for daily use. While many financial institutions will provide you with an ATM card, federal regulations restrict the number of withdrawals you can make in a month. Most financial institutions will cap the number of free transactions you’re allowed to make in a given time period. If you exceed that amount, you may be required to pay a fee, and/or the bank may close or convert your account to a checking account. 

In return for keeping money in the account, the bank will often pay you a higher interest rate than you’d receive from a standard checking account, but this isn’t always the case. Some larger banks pay as little as 0.1% Annual Percentage Yield on a deposit, while others, like PurePoint® Financial, exceed that rate of return exponentially. With PurePoint, you can easily put money into a higher-interest Online Savings Account by transferring funds online. As a division of MUFG Union Bank, N.A., PurePoint accounts are also FDIC-insured, and provide a competitive savings rate.

When your financial institution is insured by the Federal Deposit Insurance Corporation (FDIC), your account balance, up to $250,000 per depositor for each account ownership category, is insured, too. This added sense of confidence and security is what makes many people choose these types of accounts vs. risk/reward investments. 

What is a money market account?

A money market account is a sort of hybrid between a savings and checking account. Like a savings account, money market accounts come with a competitive interest rate. These accounts also allow for ATM withdrawals, and offer the same insurance protection, provided the financial institution is FDIC-insured. 

Money market accounts may also come with check-writing privileges and a debit card, which can be used in stores and at ATMs. It’s important to remember that despite having more withdrawal options, it’s not a checking account. If you write more than a certain number of checks, or withdraw money too many times (typically six transactions per month) you could be hit with a hefty charge, and/or the bank may close or convert your account to a checking account.. It’s important to familiarize yourself with the fees that come with these accounts, as they can vary by institution. 

It’s worth noting that some banks offer money market accounts that are identical to their savings account, save for a higher rate. They don’t have the other benefits that these accounts typically provide, so make sure you clearly understand the fees and features of the account you are opening.

What is the difference between a money market account and a savings account?

There are several differences between a money market and a high-yield savings account. Here’s a chart that compares and contrasts a money market vs. a competitive savings account. 

Savings account
Money market account
Competitive interest rate
Check-writing privileges
Often yes, up to a limit
ATM withdrawals
Often allowed, up to a limit
Allowed, up to a limit
Yes, if bank’s an FDIC member
Yes, if bank’s an FDIC member
Debit card transactions
Often yes, up to a limit
Minimum deposit required
Yes, in some cases
Yes, in many cases

Which should you choose?

Both a money market and savings accounts can help you save – and grow – your money. However, there are some key differences, and the type of account you choose will depend on your financial and savings objectives. If you want some regular access to your savings, then a money market account could be advantageous. If you would rather limit your access to your savings, then a more traditional savings account could be a better option.

For instance, PurePoint® Financial offers the Online Savings Account for those who want to grow their balance, rather than use it for day-to-day needs. While you’ll still have online access to your funds, the account does not come with an ATM card, to help deter the urge to dip into your savings nest egg. Your choice depends on your needs, and your preferred savings habits.

No matter which account type you choose, it’s always smart to put some in a savings account to ensure you have money set aside for the future.

This article was helpful.