Buster's Breakdown on Savings and Money Market Accounts
Differences between Money Market Accounts and Savings Accounts explained: A clear comparison.
Hey there! Let's chat about savings and money market accounts. These financial tools can help you stash some cash while maintaining easy access when you need it. Here's the lowdown:
Savings accounts and moolah market accounts (MMAs) are alike in that they both offer interest and allow you to save and withdraw funds as needed. However, they differ in terms of transactional features, interest rates, and restrictions.
The Nitty-Gritty: Savings vs. Money Market Accounts
Savings accounts usually don't come with checkbooks or debit cards. MMAs, on the other hand, often do, and they might let you write a limited number of checks or pay bills each month.
Here's a side-by-side comparison of features to help you keep it straight:
Earns interest
| Savings Acct | MMA || - | - || Earns interest | Yep || ATM withdrawals | Check! || Unlimited withdrawals (no fees) | Nope || Check-writing | Nada || Debit card | Nope || Automated deposits possible | You bet || FDIC/NCUA-insured | Of course |
Yes
Now, you might be surprised to learn that in 2020, the Federal Reserve removed the withdrawal limitations (Regulation D) that banks had to abide by, which allowed banks to let customers make more withdrawals per month without fees. Be sure to check with your bank to understand their withdrawal limit rules, as many banks still enforce these limitations.
Yes
A Few Numbers to Chew On
As of January 20, 2025:
ATM withdrawals
- Average APY for savings accounts: 0.54%
- Average APY for MMAs: 0.40%
- More than half of savers have an account with an online bank or credit union.
- Median balance for transactional accounts: $8,000
Yes
Time to Make a Decision?
Yes
You don't have to limit yourself to just one account. Many banks offer both options, so you can have a savings account for setting aside money for goals like a future trip or house down payment and an MMA to pay bills, use a debit card, or write checks.
However, if you're weighing your options, consider the following:
Unlimited withdrawals without excessive transaction fees*
Goal-Setting Time
No
Figure out what the funds are for. Whether you're saving for an emergency fund, a house down payment, or a vacation, review the pros and cons of each account to determine what suits your needs best.
No
MMAs can be a good option for saving money for specific goals, as they offer check-writing and bill-pay features, making occasional payments a breeze. But if you'd prefer to avoid the temptation of unnecessary purchases, a savings account may be the better choice.
Interest Rate Compare-o-Matic
Check-writing
You can find competitive interest rates on both types of accounts, so make sure you shop around. Don't settle for a traditional savings account; look into high-yield savings accounts—they actually deliver high yields!
No
MMAs may feature tiered rates based on balance amounts, offering higher yields for higher balance thresholds. Just be sure to read the fine print and weigh how much you expect to keep in the account against whether you'll be eligible for the best rates.
Sometimes
Keep an Eye on Those Fees
Some savings and MMAs may charge monthly maintenance fees if you don't meet certain conditions, such as having a minimum balance or making one deposit per month. Do your research to steer clear of fees that could eat into your savings. Or even better, find a bank or credit union that doesn't charge maintenance fees.
Debit card
Pros and Cons of Savings Accounts
No
Pros
Sometimes
- Pays interest
- Insured if at an FDIC or NCUA-member bank or credit union
- Easy access whenever you need the funds
Cons
Automated deposits possible
- Lower interest rates compared to MMAs
- Some banks pay nominal interest rates of just 0.01%
- Withdrawals may be limited (depending on the bank)
Yes
Even with potential downsides, having a savings account is crucial for future planning and setting aside money for potential emergencies.
Yes
Pros and Cons of Money Market Accounts
Pros
FDIC/NCUA-insured
- Experience greater APYs compared to standard savings accounts
- Flexibility to make payments, often including a debit card and/or checkbook
- Insured if at an FDIC or NCUA-member bank or credit union
Yes
Cons
Yes
- Higher balance requirements to earn the best rates
- Monthly transaction limits (though the Federal Reserve lifted this rule, some institutions still enforce it)
- Easy access to funds can work against you if you're hoping to avoid unnecessary spending
MMAs and high-yield savings accounts are fantastic options for any economic climate, but they're especially essential during periods of high inflation. Consider the APY, minimum balance requirements, and fees as you compare options.
Once you've sorted out your goals and get smart with a high-yield savings account or MMA—or both—it's time to focus on other important financial matters, like building retirement savings or exploring various investments!
- The federally mandated withdrawal limitations for savings accounts were removed in 2020, allowing banks to offer customers more withdrawals per month without fees, but be sure to check with your bank for specific withdrawal limit rules as many banks still enforce these limitations.
- In personal-finance, both savings accounts and money market accounts (MMAs) earn interest and allow easy access to savings while maintaining the ability to withdraw funds as needed, but they differ in terms of transactional features and interest rates.
- You can find competitive interest rates for both savings accounts and money market accounts, so it's important to shop around. Don't settle for a traditional savings account; look into high-yield savings accounts instead, as they deliver higher yields.
- Some banks and credit unions offer personal-finance products that include both savings accounts and money market accounts, providing unique choices for customers who want to balance goal-setting and easy access to funds while also managing their day-to-day transactions.
