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Money Market vs. Savings Account

  • A money market account is a deposit account that allows you to write checks or withdraw funds with a debit card.
  • Traditional savings accounts have limited features, but they’re one of the easiest accounts to manage.
  • High-yield accounts have higher annual percentage yields than standard accounts, making it easier to grow your balances.
  • Your financial institution may charge a fee if you make more than six withdrawals a month.

What is a money market account?

A money market account is a deposit account offering higher rates than a traditional savings account. Once you make your initial deposit, you can add money at any time, making it easier to grow your balance. You also earn interest on your deposits.

How do money market accounts work?

Money market accounts work like other types of bank accounts. You can deposit cash, checks, transfer funds from checking or take advantage of other deposit methods. You also get a debit card or check-writing privileges, allowing you to access your funds quickly. Note that some money market accounts have withdrawal limits. If you exceed the limit, you may have to pay a fee.

Generally, money market accounts are ideal for individuals with short-term savings goals.

Standard money market vs. high-yield money market

A high-yield money market account has a higher annual percentage yield (APY) than a standard account. This enables you to earn more interest on your balance.

For example, if you put $10,000 in a money market account with an average APY of 0.66%, you’ll earn approximately $66 in one year. If you invest this money in a high-yield money market account with a 4% APY, you’ll earn around $400.

Several banks offer high-yield money market accounts with APYs of 4% or higher, including U.S. Bank, Quontic and EverBank.

Best high-yield money market accounts:

Pros and cons of money market accounts

The table below lists some pros and cons of money market accounts.

Pros
  • Higher interest rates than standard savings accounts
  • Usually insured by the Federal Deposit Insurance Corporation (FDIC)
  • Funds are immediately accessible rather than tied up in investments
Cons
  • May have high minimum deposit/balance requirements
  • Some banks have limits on the number of withdrawals made per month

Featured high-yield money market account:

Key Select Money Market Savings? Account

Why we like it

Key Select Money Market Savings? Account is a great option for those seeking convenient banking and can maintain a minimum balance of $25,000 at all times. By keeping a balance of $25,000 to $1,999,999.99 and bringing at least $25,000 from outside of KeyBank, you can earn a 4.00%-4.50%* interest rate for six months.

An overview

APY Minimum deposit Monthly fee
4.00-4.50%* (2.41%-2.92% blended APY) $5,000 $20, waived with a daily $25,000+ balance or KeyBank consumer relationship package checking

*Figures are dependent on location and are accurate as of July 2024.

KEYBANK MONEY MARKET

Our top picks for savings accounts

What is a savings account?

A traditional savings account is a deposit account designed to hold funds you don’t need right away. For example, if you want to save up for a new car, you can deposit money in a savings account every month until you have enough for a down payment.

Savings accounts are ideal for consumers who want to grow their savings without taking big risks. Opening a savings account is also a great way to change your spending habits. If you set aside money in a separate account, you may be less likely to spend it when you’re out shopping or browsing the web.

Using our savings calculator can help you see how your money could grow over time in a savings account.

How do savings accounts work?

Savings accounts work by making deposits as often as you like into an account which will then earn interest. Some people take cash to a local bank branch, while others transfer funds from their checking accounts. You may even be able to set up automatic transfers from your paycheck.

When you want to withdraw funds, you can go to a local branch, transfer money to another account or use your ATM card to get cash.

In 2020, the Federal Reserve Board revoked the rule requiring banks to charge a fee for more than six savings account withdrawals per month. However, some banks still have limits on the number of fee-free withdrawals you can make each month, so review the terms of your account carefully.

Standard savings vs. high-yield savings

A high-yield savings account has a much higher APY than a standard savings account. The national average savings APY was just 0.45%, according to the FDIC. In contrast, the best rates for high-yield savings accounts range from 4.25% at Capital One to 5.24% at Western Alliance.

Pros and cons of savings accounts

Savings accounts have a few advantages and disadvantages you should know about.

Pros
  • Relatively risk-free
  • Insured by the FDIC or the National Credit Union Administration (for accounts at credit unions)
  • Easy access to your funds
Cons
  • Some banks have minimum balance requirements
  • Variable interest rates
  • You may have to pay a monthly service fee

Money market account vs. savings account

The table below compares the features of a standard or high-yield savings account vs. a money market account:

Minimum deposit Some banks have minimum deposit requirements. Some banks have minimum deposit requirements.
Minimum balance You may be required to maintain a minimum balance. You may be required to maintain a minimum balance.
Earns interest Earns interest at a variable rate that’s usually higher than the rate on a standard savings account Earns interest at a variable rate that’s usually lower than the rate on a money market account
Transfers and withdrawals Limit of six transfers per month at some banks Limit of six transfers per month at some banks
FDIC insured Insured for up to $250,000 per depositor, per bank Insured for up to $250,000 per depositor, per bank
Debit cards Yes No; some banks offer ATM cards
Check-writing Yes No

Similarities between money markets and savings accounts

When comparing money market account vs. savings account features, you’ll notice a few similarities:

Differences between money markets and savings accounts

When you compare money market vs. savings accounts, you also need to be aware of the differences:

How to choose between a money market account and a savings account

Before you open a savings account or a money market account, consider the following:

When should I get a money market account?

You should get a money market when you have enough cash on hand to meet the minimum deposit requirement. A money market account may be right for you if you’re concerned about accessing your funds. This type of account allows you to write checks or use a debit card, enhancing accessibility.

When should I get a savings account?

You should get a savings account as soon as you have enough money to meet the minimum deposit requirement at your preferred bank. If your bank doesn’t have a minimum deposit requirement, you can open a savings account at any time — the earlier, the better.

How to open a money market or savings account

To open a money market or savings account, follow these steps:

Choose a bank.

Review the account terms carefully.

Fill out the application. You may be required to provide ID and proof of residence.

Make your initial deposit.

Add funds whenever you can.

Compare money market accounts

Advertiser Disclosure
Bank
APY
Monthly fee
Minimum opening deposit
More details
Patriot Bank Online Money Market Account
apy
$0.00
$0.00
FDIC Insured
rates_last_updated
Quontic Bank Money Market Account
apy
$0.00
min_deposit
FDIC Insured
rates_last_updated
American First Money Market Deposit Account
4.60 %
$0.00
$1.00
LEARN MORE NCUA insured
Rates updated as of 9/9/2024
UFB Portfolio Money Market
5.15 %
$0.00 with a $5000.00 balance
min_deposit
FDIC Insured
rates_last_updated
mph.bank Money Market Deposit Account
4.50 %
$0.00
$1.00
LEARN MORE FDIC insured
Rates updated as of 9/9/2024
Vio Bank
apy
$0.00
$100.00
FDIC Insured
rates_last_updated

FAQ: Money market vs. savings account

Is a money market better than a savings account?

One account isn’t better than the other. Both types of accounts have features designed to help you save money.

Is a money market account a savings account?

Money market accounts are similar to savings accounts, but they’re not exactly the same.

What is the downside of a money market account?

A money market account may have a high minimum deposit requirement. Some banks also charge fees for more than six withdrawals per month.

Do you pay taxes on money market accounts?

Yes, interest is treated as income, therefore you have to pay taxes on savings account interest earnings.

Are savings accounts safer than money markets?

Money markets are just as safe as traditional savings accounts. Both are insured by the FDIC to give you extra peace of mind.

Are money market accounts FDIC-insured?

Yes. Each account is insured for up to $250,000 per depositor, per bank.

Do money markets and savings accounts have different interest rates?

Yes. Money markets usually have higher rates than traditional savings accounts. You’ll earn even more if you open a high-yield money market account, which comes with a higher-than-average APY.

About the Author

Elizabeth Smith
Elizabeth Smith Personal Finance

Elizabeth Smith is an experienced travel and finance writer who specializes in topics including credit cards, travel insurance, and personal finance. Travel insurance, in particular, has both professional and personal significance for Smith. She’s traveled to 73 countries, and has extensive experience choosing and using various policies — she understands how valuable the right plan can be in an emergency, and loves to help readers find the perfect fit.

Smith comes to the world of finance from a scientific and technical background. She spent more than 10 years writing about engineering, science, and technology for universities and private companies. When she’s not writing or traveling, Smith can usually be found hiking or Nordic skiing.

About the Reviewer

Blake Esken
Blake Esken Los Angeles Times

Blake Esken has over 15 years of experience in product management and has been a member of the Los Angeles Times staff for over five years.

As part of his role at the Los Angeles Times Commerce Team, Blake acts as the in-house reviewer and fact checker for LA Times Compare. He supervises all content for compliance and accuracy and puts to use skills he has honed through years of experience managing high-stakes projects for a range of industry-leading companies.

He has a strong background in data analysis, compliance, and communication, which allows him to support LA Times Compare through fact-checking in an effort to provide up-to-date and factual information across our content.

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