Money Market Account vs. Savings Account: What’s the Difference?
Comparing money market savings accounts to basic savings accounts can help you see which type of account fits best with your financial goals and preferences.
What Is a Money Market Savings Account?
A money market savings account is a type of account from a bank or credit union that typically offers a higher interest rate than those of traditional savings accounts. It may have a higher minimum balance requirement than with basic savings accounts, too.
Money market savings accounts combine features of savings accounts and checking accounts. The higher interest rates help you save money quickly. And with checks and digital banking, it’s still easy to access your money when you need to.
Although money market accounts provide flexible spending, they’re not intended for use as everyday spending accounts. Until a federal regulation was suspended in April 2020, it limited withdrawals by check, debit card purchases, or transfers to six per statement cycle. Some banks and credit unions may still impose a fee if the limit of six withdrawals or transfers is exceeded. KeyBank does not.
To protect your funds, eligible money market accounts from banks and credit unionsare insured by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA), respectively, up to $250,000 per depositor for each account ownership category.
What Is a Basic Savings Account?
A basic savings account is a deposit account offered by banks and credit unions that allows you to store your money securely while earning a modest interest rate. It is a simple and accessible way to save money for short-term goals or emergencies. Basic savings account features include easy deposits and withdrawals and no or low minimum balance requirements.
When You Shouldn’t Use a Money Market Account
While money market accounts are great for saving money, they’re not the best type of account for every instance. Depending on your circumstances, it’s important to think about how you plan to use the account before you choose a money market savings account over a basic savings account.
- Everyday banking. If you need an account for everyday use, a checking account may be a better fit. Transaction limits, if applicable, allow spending from your money market account but encourage you to keep your money in the account to keep earning interest.
- Fixed rates. Money market accounts have variable interest rates that can fluctuate daily. Keep track of the annual percentage yield (APY) and shop for higher rates — with these accounts, you’re free to move your money anytime.
- Balance requirements. Some money market accounts require significant balances to earn high APYs. If you can’t qualify for the rate, it may make sense to look for another money market account or high-yield savings account with a lower balance requirement.
How Do You Choose a Savings Account?
To choose between a money market savings account and a basic savings account, consider your financial goals and preferences. If you prioritize higher interest rates and can maintain a higher minimum balance, a money market savings account may be the right choice.
However, if avoiding a higher minimum balance requirement is important to you, a basic savings account may be a better option. Evaluate the interest rates, minimum balance requirements, fees, and additional features of each account to make the right choice for your financial needs.
Ready to Open a Savings Account?
Whether you want to open a money market savings account or a basic savings account, KeyBank is here to help. Compare accounts and open yours online.
