Key insights:
- You can earn interest on your savings with either a savings account or a money market account, though the annual percentage yield (APY) may vary
- Features, such as the ability to write checks or use a debit card, vary between accounts
- Compare balance requirements, withdrawal limits and features to choose the account that fits how you plan to save and spend
If you’re looking for a place to save for a purchase or deposit an emergency fund, you may be comparing a savings account to a money market account (MMA). These two types of accounts are more alike than different.
Money market accounts may differ from savings accounts by offering debit cards, check-writing privileges or bill payment capability, but these features aren’t guaranteed.
Since each account works similarly, this guide will help you understand areas where the accounts may vary.
What is a savings account?
A savings account is a type of bank account used to hold money, generally while earning interest. Funds stored in a savings account may be readily accessible to accountholders. However, savings account funds typically can’t be accessed with a debit card or checks. Instead, you may need to transfer money from your savings account to your checking account to access it. Some banks may charge a fee if you make more than 6 transfers from savings to checking.
If the bank or credit union issuing your savings account is federally insured by the Federal Deposit Insurance Commission (FDIC) or National Credit Union Association (NCUA), then your account may also be insured. Additionally, some savings accounts may offer low or no minimum deposit requirements and unlimited withdrawals.
What is a money market account?
A money market account is a savings account that allows you to deposit funds and earn interest. Money market accounts may sometimes allow you to write checks and access funds with a debit card. However, some banks or credit unions may limit the number of withdrawals you can make from a money market account each month.
Like savings accounts, money market accounts may be insured.
Money market account vs. money market mutual fund
While comparing accounts, take care not to confuse money market accounts with money market mutual funds or money market funds. Though the two might sound similar, these two accounts are not the same. A money market mutual fund is an investment account that you can use to invest in low-risk holdings such as CDs and government securities. Money market mutual funds aren’t FDIC or NCUA insured like money market accounts are.
Comparing features: money market accounts vs. savings accounts
| Feature | Money market account | Traditional savings account |
|---|---|---|
| APY range | Potentially higher | Potentially lower |
| Access to funds | Access funds with checks, debit card or ATM withdrawals | May be able to access funds with a debit card or check. Can usually access funds with ATM withdrawals. |
| Transaction limits | Number of monthly transactions may be limited, depending on bank policy | Banks may charge a fee after 6 transactions |
| Minimum balance requirements | May be $0, depending on bank policy | Common, can be higher ($1,000-$10,000) |
| FDIC/NCUA insured | Yes (if bank is insured and account meets requirements) | Yes (if bank is insured and account meets requirements) |
Money market and savings accounts: pros and cons
While the features of each savings and money market account might vary depending on the bank, both offer similar advantages and disadvantages.
Pros
- Both savings account and money market account deposits earn interest
- Because the FDIC and NCUA typically insure savings and money market account deposits up to FDIC and NCUA limits, both account types present low risk
- Many savings accounts and MMAs are accessible online and in person
- Bank policies might differ, but each account type usually charges low or no monthly fees, especially when you meet minimum balance requirements
Cons
- While some money market accounts may earn higher interest rates than savings accounts, both may offer lower rates compared to other savings accounts like certificates of deposit (CDs)
- Depending on the bank or credit union, each type of account could have a minimum balance, which you must maintain to avoid fees or closure
Is a money market account better than a savings account?
Both money market and savings accounts are low-risk bank accounts that could help you grow an emergency fund or store funds for a financial goal. One isn't necessarily better than the other.
To find the best fit for you, consider:
- Balance requirements
- Your deposit size
- Your current financial goals
- Current rates, features and terms across credit unions and banks
- How much more or less competitive interest rates might be with other savings products like CDs
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
