What is a savings account?
A general savings account is a place to safely store your money and earn a little bit of interest. Thanks to the magic of compound interest, your earnings on a savings account allows your balance to gradually multiply just by sitting in the bank.
What is a money market account?
A money market account is like a savings account mixed with a checking account feature like checks or a debit card – though you may be limited in how many times per month you can withdraw without a fee. Typically, money market accounts earn a higher amount of interest than basic savings accounts, making them a good place to store savings.
The beauty of a money market account is that, though you earn higher interest, you still have access to your funds. In other words, your money is readily accessible, versus being tied up in a fund that is better left untouched for decades.
With a money market account, you can earn competitive interest rates (with higher rates for higher balances!) while still having access to your money!
What is the difference between them?
The main difference between a money market account and a regular savings account is the ease of accessibility to your funds.
- Money market accounts typically offer you the ability to write checks, or to use an ATM and debit cards for withdrawals like a checking account — though the number of times you can do this monthly is much more limited than with a checking account.
- With a savings account, it’s not as easy to withdraw money. Typically, you will have ATM access, but you won’t be able to write checks from your savings account directly. You’d have to withdraw the funds or electronically transfer them first.
- The interest rates and minimum balance requirements for each type of account will likely also vary. Often, money market accounts require higher minimum balance thresholds in order to get the highest APY.
What do they have in common?
These two account types do share many similar features.
- They’re insured by the FDIC — meaning they’re equally secure.
- They both pay interest.
- They allow as many deposits as you want!
- Both accounts limit you to six outgoing transactions per statement cycle (including transfers and withdrawals) — that’s the federal law. After that, you may be hit with withdrawal fees.