Savings Accounts vs. Money Market Accounts: What’s the Difference?

It’s more than just interest earnings potential

Person with baby looking at account statement
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Savings accounts and money market accounts provide ways to earn money on cash set aside. Both accounts provide earnings in the form of interest. Typically, the higher the balance in the account and the longer the money is kept there, the more interest it gains. However, different factors can contribute to these earnings.

A savings account refers to an account that accrues interest and is offered by most banks and credit unions. A money market account (MMA) works in a similar way but includes additional features or terms as set by the bank or financial institution. While they function similarly, there are differences in the ways they are structured, their features and capabilities, and how they accrue interest.

What’s the Difference Between Savings Accounts and Money Market Accounts?

Savings accounts and money market accounts allow individuals and businesses to earn interest on the money they deposit. They are also both insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) at banks; accounts offered at credit unions are similarly insured by the National Credit Union Administration (NCUA). Even so, there are many differences to the structure and capabilities of these accounts.

Savings Account Money Market Account
Earns higher interest than a checking account, but less than a money market account Earns higher interest rates than a savings account
Limited options for withdrawals of funds Greater access to funds
Minimum balance required is usually a low amount Minimum balance required is usually a higher amount

Interest Accrued

Account holders on savings accounts and money market accounts receive earnings from the interest accrued on the account, known as the annual percentage yield (APY). Both accounts help supply funding to banks, which in turn lend out these funds as loans. Banks then provide a small percentage of earnings to the account holder in the form of interest, or APY. These interest rates are based on the federal funds rate, although they differ depending on the financial institution.

The interest rates are generally higher in money market accounts compared to traditional savings accounts. MMAs, which may also be referred to as money market deposit accounts (MMDAs), typically gain more earnings, not only because of a higher APY, but also because most require a higher minimum deposit and may offer tiered interest rates based on your account balance.

Access to Funds

Depositing funds into savings accounts and money market accounts is similar, but the way account users can access these funds differs between the two. Savings accounts are set up with a basic structure that limits the way funds can be withdrawn. Since savings accounts don’t always offer ATM cards, the account holder typically must withdraw funds directly at the bank or by completing a transfer. Some savings accounts may provide online access for transfers or other features, but may be limited to a specific number of transactions per month.

A money market account often provides more options for accessing funds. These accounts may even function similarly to a checking account, with checks, debit cards, and easy-access transfer methods available online. Many MMAs offer debit cards for access to the account at the ATM, as well as online banking options.

Note

Although no longer a federal mandate, many savings and money market accounts limit the number of withdrawals to about six per month.

Minimum Balance

While banks may set their own specific minimum balance requirements, there are significant differences between savings accounts and money market accounts. For a savings account, the minimum balance is typically a low amount, usually less than $1,000. For example, a bank may set a minimum savings account balance at $500, requiring you keep a balance of at least $500 in order to earn interest and/or forgo any monthly fees. Some savings accounts may not require a minimum balance.

The minimum balance on a money market account typically is higher—often more than $1,000—with higher tiers that might require a balance of $25,000 or more. Some MMAs may not charge fees for keeping up the minimum balance. In addition, the initial deposit needed to open an MMA is often higher than that of a savings account.

Which Is Right for Me?

Choosing a savings account or money market account to yield interest depends on your financial ability and personal preference. Those with smaller savings amounts may be limited to the savings account if they can’t meet the minimum balance requirements of the money market account. In addition, a savings account may be a good option if you are opening an account for the first time due to its simplicity.

If you have a larger sum to deposit, you may benefit from a money market account because it generally yields higher interest. With options such as additional tiers, an MMA can maximize your earning potential. It also provides more options for access to your cash, such as a debit card and check-writing privileges, as well as features like online bill pay.

Note

Make sure to compare the terms and conditions of different banks, credit unions, and other financial institutions. Some may be more lenient with balance requirements, while others may offer additional preferred features, such as limited fees or online bill pay options.

The Bottom Line

Savings accounts and money market accounts are similar in that they both provide earnings from funds deposited into the account in the form of APY. Those seeking a way to save their money and still make a slight profit can use either account to do so. When comparing different account types, it’s important to read through the terms and conditions as these can vary, from a $0 minimum balance to a $5,000 minimum balance, as well as which features are available.

Frequently Asked Questions (FAQs)

What do I need to apply for a savings account or money market account?

To apply for a savings account or a money market account, you’ll need to provide basic personal information, such as a Social Security number, address, and photo ID, as well as the required amount for the opening deposit. The process is simplified compared to other types of accounts, but the bank may still reference your credit history.

Can I withdraw funds from my savings account or money market account?

Funds from both savings accounts and money market accounts may be withdrawn; however, the bank may limit your number of withdrawals per month. Depending on the bank, the interest earned may be reduced, other fees incurred, or the account can be closed if the number of withdrawals exceeds this limit.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Wells Fargo. “Types of Bank Accounts.”

  2. Bank of America. “Bank of America Advantage Savings.”

  3. Discover. “Money Market Account.”

  4. Federal Reserve. “Federal Reserve Board Announces Interim Final Rule To Delete the Six-per-Month Limit on Convenient Transfers From the ‘Savings Deposit’ Definition in Regulation D.”

  5. Affinity Plus. “Money Markets.”

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