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By Ken McCormick
Vice President, Relationship Management

What is the Difference Between Money Markets Accounts and Savings Accounts?

Nov 19, 2019

  • NASB
  • Money Market Account
  • Savings Accounts

Making a habit of saving money will help you reach your financial goals. You’ll want to put the money you’ve saved in an account that earns higher interest that is easily accessible. Money market and savings accounts are two options to consider. While they have similarities, they are not the same. To choose the account that's right for you, it’s best to compare details for each type, and then decide.

What is a Savings Account?

Savings accounts are like checking accounts in that you may have access through ATM transactions. These accounts earn a small amount of interest and typically have lower fees or no fees associated with them. Federal law prohibits these accounts from having more than six transfers and/or withdrawals per statement cycle or month. Also, a savings account can be linked to your checking account for secure transfers between the two, and to provide overdraft protection.

What is a Money Market Account?

Money market accounts are also depository accounts that earn interest. They are a hybrid, similar in ways to both checking and savings accounts. The money that you put into a money market is invested in financial markets. Financial institutions sometimes call these accounts, "high-rate" savings accounts. You can write checks and access funds through ATMs or electronic transfers on these accounts. The transactions are also limited to six transfers and/or withdrawals per statement cycle.

Similarities Between Money Market and Savings Account

Both money market and savings accounts pay interest on the funds deposited in the account. Depending on whether you have an account at a bank or credit union, they’re insured by the government. The Federal Deposit Insurance Corporation (FDIC) insures banks, while the National Credit Union Administration (NCUA) covers credit unions. What this means is that your money is protected if the bank or credit union fails.

While you can make as many deposits as you want to these accounts, you're limited to six transfers and/or withdrawals per statement cycle by federal law. Both of these account types are easy to open, typically requiring your name, address, phone, email, and employer information, as well as a deposit to open the account. For your convenience many brick and mortar banks, as well as online banks, allow you to open these accounts through the Internet.

How Money Market and Savings Accounts are Different

The way to access your funds through a money market or savings account is one of the key differences between the two. With a money market, you can write checks, use a debit card or ATM to make withdrawals. A savings account typically allows access to your funds via ATMs. However, there's no check-writing feature.

The interest rates on these two types of accounts can also vary. Money market accounts tend to offer a higher interest rate since the money is used in financial markets, which tend to yield higher returns.

The tradeoff for the higher interest rate you’ll receive on a money market account is the higher minimum deposit requirement. You generally have to keep a higher minimum balance on a money market account than in a savings account. Pay attention to the minimum deposit requirements to make sure that it's an amount that you feel comfortable leaving in an account. Dropping below the minimum amount could end up costing you in fees.

Should I Choose a Money Market or a Savings Account?

Both have a mix of features that make each of them a good choice. A savings account that provides you overdraft protection with your checking can give you some peace of mind. Since the funds are less accessible than a money market, it might be easier to fight off the temptation of using the funds. A money market can earn a higher rate of interest on your money, and you’d be able to write checks. This can come in handy when something unexpected comes up.

If you are setting up an emergency fund or saving for a significant purchase in the future, a savings account may make more sense. Saving for a home and using the checks to pay for related expenses such as a home inspection, might be best left to a money market account. It all comes down to your situation and needs.

When you are ready to open a money market or savings account, NASB is here to make it easy for you. Call us at 855-338-0915 to open up your account today.