Money Market accounts and Savings accounts are often lumped together into one group. The two kinds of accounts do share some similarities, but they aren’t carbon copies of one another — each offers different features that you might consider pros or cons, depending on your financial situation and habits.
So which one is best for you? Take a look at what each offers and decide for yourself:
Money Market: Extras Included
Money Market accounts typically come with a few more features than do standard Savings accounts. If you put your money into a Money Market account, you would traditionally earn greater interest than you would by putting the same amount into a Savings account. The market’s instability and the economy’s struggles have created the topsy-turvy present-day scenario in which the average Savings account yield is actually higher than the average Money Market account yield. Neither will earn you much interest, but savings rates are just a touch higher than their Money Market counterparts at the moment.
Money Market accounts usually let you write a certain number of checks each month, putting them at the crossroads between a Savings account and a Checking account. Similar to a checking account, your Money Market account could also offer you a debit card for basic transactions. You might be required to pay the price for these extra perks by meeting basic monthly account activity requirements. That means you’ll have to keep a certain amount of money in your account to hold onto the additional features. You also might face withdrawal limits, meaning you might only have access to your money three to five times each month.
Money Market accounts are valuable as emergency fund-holders, but not the best option for day-to-day money management.
Savings: For the Basic Banking Customer
A Savings account is about as basic as banking comes. The vast majority don’t charge fees and don’t require a certain level of monthly account activity. To open a savings account, usually all you need is documentation and a bit of money (minimum balances may vary from bank to bank but are usually minimal).
The average return on a Savings account is currently 0.26%. That’s not great, but it’s as good as or better than you would get with a more difficult-to-maintain Money Market account. Savings accounts can be accessed as many times per month as necessary, which represents a big upgrade from the restrictions on Money Market accounts if you’re looking for an account to use every day.
As you can see, the accounts are more alike than they are different. They each are offered by FDIC-insured banks and both offer relatively low interest rates. Money Market accounts might fit your needs if you are interested in putting some money away for a rainy day, while Savings accounts might be right for you if you want to move money in and out of your account on a daily basis.