When choosing MMAs, the most important consideration is interest rates. But there are a few other factors to consider, such as a minimum initial deposit, a requirement for balance maintenance, the number of transactions allowed per month, accessibility tools, and fees.
What are the Differences Between Money Market and Savings Accounts?
It is always a good practice to have readily accessible savings to maintain good financial health. You may wonder where to stash the money you have been accumulating and earn interest on it. Some popular options are money market accounts (MMAs) and regular savings accounts. Both are highly liquid options, allowing you to access your money whenever you need it.
The main difference between money market and savings accounts is their return potential. Unlike savings accounts, MMAs typically offer better returns. This article examines the basics of these two, which will help you choose one that fits you best.
What Is Money Market Account?
A money market account, or MMA, is a savings product that works as a mix of savings and checking accounts. MMAs earn interest like saving accounts. Although it depends on the bank or the financial institution, a money market account earns a much higher interest rate than savings accounts.
Besides earning interest, many banks offer money market savings accounts that let you write checks and use debit cards for purchases, transfers and ATM withdrawals.
What Is a Savings Account?
A savings account is an account that earns interest on your money to grow your savings. These accounts are a safe and convenient place to stash your money. It is one of the most popular saving vehicles in India. These are considered good options for saving up for a big purchase or the future.
Though savings accounts earn much lower interest rates than other saving vehicles, it depends on how much money you hold.
What Are the Difference Between Money Market and Savings Account?
Here are the key differences between MMAs and savings accounts:
|Money Market Account
|Earns higher interest than a regular savings account
|Earns higher interest than a checking account but lower than a money market account
|Minimum balance required is usually higher
|Lower minimum balance required
|Better access to funds
|Limited options for funds or withdrawals
These differences are further explained for a better understanding.
- Interest Rates: Another thing that makes a big difference between a money market account and a savings account is the interest rates. MMAs often offer higher interest rates than savings accounts. Money market accounts often earn depending on the account balances, with more balances earning better interest rates.
- Deposit Requirements: The minimum deposit requirement for money market accounts is usually higher than for savings accounts. It depends on the bank or the financial institution, so you should check this amount before opening an account.
- Accessibility: The main difference between the money market and savings accounts is the accessibility to the funds. You can access your funds through debit cards with money market accounts.
On the other hand, you can often access your savings account through debit card of your checking account. The savings account does not offer any debit card by itself. Also, you cannot write checks directly from your savings accounts either.
How Money Market and Savings Account Work?
Though a money market account is a savings account, they work differently.
Money Market Account Working
MMAs provide accountholders with the benefits of a savings account while offering them the features of a checking account, which include:
- Interest: Like savings accounts, money market savings account also offers accountholders to earn interest on their balance.
- Check-writing: Some banks and financial institutions allow MMA holders to write checks against their account balances.
- Debit Cards: Along with checks, some banks include debit cards with money market accounts, allowing account owners to transfer, withdraw and deposit through ATMs.
Savings Accounts Working
Savings accounts are simple saving vehicles allowing you to deposit money and earn interest. You can continue depositing money to savings accounts through one or more of these methods:
- Check or cash deposit at the branch
- Mobile check deposit
- Check or cash deposit at the ATM
- Direct deposit
- Transfer from another bank account
Which Is Better Among Money Market Account and Savings Account?
While debating about money market and savings accounts, you may ask which one is the better. Money market accounts provide the best mix of features with more flexibility and higher interest rates. The ATM with MMAs offers you convenient withdrawal and check-writing abilities, but they may not help you save as effectively as a savings account.
These features make it too easy to resist spending the money you started to save. You may also want to maintain a savings account when you know you will be tempted to spend more with your money market account. With your regular savings account, you will not have easy access to withdraw money from an ATM.
Tips for Choosing the Right Bank Account
If you want to stick with one of the savings accounts, consider researching both options to help you choose the right one.
- When You Should Choose a Money Market Account: You may choose a money market account if you have a lot of money to deposit. Because the minimum balance requirement is higher in MMA than in regular savings accounts, if you can maintain the minimum balance in the account for a long time, you can get many benefits from it. The greater your balance, the higher the interest rates. Also, if you want to write checks and withdraw money through an ATM from your savings account, a money market account is the right choice. Also, since MMAs offer more interest, it is a perfect place for saving your money for a long period.
- When You Should Choose a Savings Account: A regular savings account can be the right place if you want to deposit a modest amount of money without worrying about the minimum balance requirement. If cheque writing and constantly withdrawing money is not your requirement from your savings account, this will work well for you. Since you can earn interest from it, a savings account is the best place to keep your money which will help you to achieve your short-term objectives.
Though both seem similar, understanding the main difference between the money market and savings accounts will help you decide where to hold your money. Choosing the right savings account largely depends on how much money you want to save and how frequently you want to use it.
Whichever type of account you choose, you will get a wide option of banks and financial institutions. Do your research, understand your needs and then open an account with your chosen institution.
FAQs About Money Market vs. Savings Accounts
Both money market accounts and savings accounts are safe places to keep your money.
A money market fund or MMF can be a good alternative to savings and money market accounts, as it is highly liquid and comes with debit cards and checks. Another possible alternative is a high-interest checking account offering high interest rates with a flexible withdrawal system.
Other Important Guides About Wealth Management
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