How We Picked
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.
How did we decide what makes a great money market account? We researched around 65 money market accounts from the top banks for this guide.
The Best Money Market Account picks are based on the consistency of high-interest rates, fees, minimum balance requirements, and account features. The overall rank for each institution within a specific category is dependant on how many days in the quarter that institution’s score was among the top 10.
What is Money Market
For many people who start building their savings, the instinctual option is a high-yield online savings accounts. As their account balances increases, they want to consider turning it up a notch by earning better yields from money market accounts.
The term “money market” is often a cause of confusion for many people who are looking to start working on their savings goals. It deters them from learning more about money market accounts while they simply opt for a “savings” account.
Savings accounts and money market accounts are nearly identical except that money market accounts tend to offer higher interest rates, but they may require larger deposits to earn those rates.
Nevertheless, a savings account is a great start. Your very first bank account was most likely a traditional savings account, not a money market account. But, as your savings and financial savvy start growing, you may opt to upgrade to a money market account for a higher rate of return.
Money Market vs. Regular Savings
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.
Ease of Money Access
A debit card and check-writing are major selling points for money market accounts because it usually takes 3-4 days to transfer funds out of a savings account. But, money market accounts restrict customers to only 6 transactions per month so they don’t function entirely like checking accounts.
If you feel that a debit card and paper checks would come in handy for unexpected events but want to keep your cash earning interest, a money market account would fit the bill.
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.
Money Market accounts are valuable as emergency fund-holders, but not the best option for day-to-day money management.
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).
Unlike Money Market Accounts, 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.
Currently, interest rates are so low that money market rates offer returns similar to those of high-yield online savings accounts. In some cases, money market rates have fallen lower than savings accounts.
Money market accounts usually generate higher yields than savings accounts when benchmark interest rates are higher. When the Federal Reserve decides to raise interest rates, money market rates will likely beat the best savings rates. And if you plan to continue building your savings, it would be a good move to transfer part of your stash into a money market account so your cash can grow faster.
Consider Interest Earnings and Fees
Let’s say, for example, that you have a choice between an online savings account offering a 1.00% APY and a money market account with a 1.50% APY. The money market account charges a $5 monthly maintenance fee for balances under $10,000. The savings account charges no maintenance fee.
Now, assume you deposit $5,000 in the account to start. You save another $100 a month, earning 1.00% interest, compounded daily. After one year, you’d have $6,257. If you were to go with the money market account and earn 1.5% interest instead, you’d have $6,285. That’s $27 more in interest.
But there’s a catch. The monthly maintenance fee would add up to $60 for the year if you don’t hit the $10,000 minimum balance threshold. In that scenario, you’d actually come out ahead by choosing the online savings account instead.
That doesn’t mean, however, that you can’t find a great deal on a money market account. You just have to do your research. If you’re not sure where to start, our recommendations for the top savings accounts are a good beginning.
You’ll find recommendations on which online savings accounts are the best. You can also get the rundown on how different money market accounts stack up. That’s helpful if you want to see at a glance which banks are paying the best rates and charging the lowest fees.
Money Markets Are Great if Your Savings Exceed $10,000
When you’ve been diligent in establishing a sizable savings of over $10,000, it may be time to open a money market account to take advantage of higher APYs.
Many money market accounts require a $10,000 minimum balance to obtain the highest APY available. Fall below that threshold and your rate may drop or a fee may be imposed.
Some banks do not have a required minimum balance for their money market accounts, which would be great even if you didn’t have $10,000 saved up.
Which One Should Use to Grow Your Savings?
The answer to this question depends on a few different things. First, how much do you have to save? If you’re just starting your savings efforts, you may not have enough cash to set up a money market account.
In that case, you could start with an online savings account. As you earn interest on what you’re saving, you can build up your balance. Eventually, you could switch over to a money market account.
On the other hand, if you’ve got a good chunk of change to save, you may want to skip the online savings account and go straight for a money market account. The key is to pay attention to how the rates and fees compare.
Use Automation to Hit Your Savings Goals
Online savings accounts and money market accounts both have their own appeal. Regardless of which one you end up choosing, hitting your savings targets begins with consistency.
Setting up automatic deposits into your online savings or money market account can help you grow your money without a lot of stress. Depending on how often you get paid, you could schedule deposits to be weekly, biweekly or monthly. If you’re earning a higher interest rate, you should be able to see your savings grow fairly quickly if you’re saving regularly.