Money market accounts and savings accounts have a lot of similarities than you may think. Among other things, both allow you to achieve your saving goals risk-free or very low risk.
However, the choice between money market vs savings accounts often boils down to interest rates and fees. So, before you decide on which account to open, it’s important to compare many of their features.
Money Market vs Savings: Overview
Money market accounts and savings accounts have a lot in common.
Both types of accounts allow you to deposit a certain amount of money with a bank and you get some type of interest on your money in return.
Your money in a savings account and a money market account are FDIC insured. There are some key differences, though. Money market accounts offer a higher interest rate than savings accounts.
|CIT Bank |
|Savings Builder that fits your lifestyle.|
Earn up to 0.95%APY.
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Minimum monthly deposit of $100 OR minimum balance of $25k.
Most savings accounts require no minimum balance, while money market accounts usually require a high minimum balance–around $1,000.
Savings accounts are very liquid, meaning that you can easily transfer money between checking and savings accounts.
On the other hand, money market accounts, while also liquid, will penalize you if you fall below the minimum required deposit.
Money market accounts have check writing privileges, while savings account have none.
Money Market vs Savings: Table
This table below compares some of the features found in savings and money market accounts.
|Money Market Accounts||Savings Accounts|
|FDIC-insured||Yes–up to $250,000||Yes–up to $250,000|
|Checks||6 check per month||No|
|Minimum balance||Yes –usually $1,000||None|
|Transactions||6 per month||6 per month|
|Best Account||CIT Bank Money Market Account||CIT Savings Builder|
What Is A Money Market Account?
A money market account or MMA is a type of bank savings account, but with some additional and different features than a regular savings account.
The interest rate on money market accounts are better than that of savings accounts. Moreover, they offer check-writing privileges.
That means you can write checks to 3rd parties, typically up to 3 per month, against your balance. They even offer debit card privileges as well.
Lastly, the FDIC insures MMA up to $250,000, just like a savings account.
One thing to note is that you should not confused MMAs with money market funds.
While they are great place to park your money as they invest in short-term investments such as certificate of deposit, treasury bills, and other government securities, they are not the same thing.
Pros & Cons of Money Market Accounts
1) Interest rates
One of the reasons most people prefer an MMA is the fact they offer a much higher interest rate than savings accounts.
2) Check writing and debit card privileges
MMAs offer check writing and debit card privileges. But there is a limit. You can only write six checks per month against your balance.
So, MMAs are best for those who do not need to write more than six checks. Also, there is no penalty when withdrawing your money.
3) FDIC insured
The Federal Deposit Insurance Corporation (FDIC),an independent federal agency, insures money market accounts, just like savings accounts, up to $250,000.
1) Account minimums
MMAs generally require a deposit minimum amount to open the account and requires you to maintain a minimum balance to receive the best interest rate.
So MMAs are a good choice for those investors and savers who can maintain a high daily balance in the account.
2) Account fees
Another drawback of MMAs is the fee. If you don’t maintain the required minimum balance, a fee will apply.
So, maintaining the minimum balance is important because any fee will eat out your interest or earnings.
What is a savings account
A savings account is a deposit account that you can open at a bank or other financial institution. This account pays very little interest.
However, it is very safe and it is a good option to save your money.
Savings accounts are generally good for students or those with very little money and those who want easy access to their funds without penalty.
They are a good place to save money for short-term goals such as saving money to buy a house, or building an emergency fund.
You have unlimited money withdrawals. However, you can only make six withdrawal transactions.
Pros and Cons of Savings Accounts
1) FDIC insured
Savings accounts are FDIC insured-or NCUA insured (if offered by a credit union)
Savings accounts are very liquid. That means you get quick access to your funds at any time without any penalty.
3) Minimum balance
Unlike money market accounts, savings accounts typically have no initial deposit or minimum balance requirement.
However, a high-yield savings account may require a minimum balance. And a maintenance fee or a penalty may apply if your balance falls below the required minimum.
A regular savings account pays interest just like a money market account, though the interest paid by a savings account is very, very low.
Money Market vs Savings: which one should you choose?
Best Money Market Accounts
CIT Bank Money Market Account
The CIT Bank money market account is one of the best ones out there. Currently, the money market account offers a 1.0% APY.
This is very competitive comparing to other MMAs. Moreover, CIT Bank’s MMA has a required account minimum of only $100.
Best Savings Accounts
CIT bank Savings Builder
The CIT Bank Savings Builder is among the best savings accounts where you can a very competitive interest rate.
In fact, you can earn a better rate with CIT bank Savings Builder than most money market accounts. The Savings Builder is currently offering a 0.95% APY.
To get this competitive rate, you can 1) open the account with a minimum of $100 and deposit at least $100 per month afterwards.
Or, (2) open an account with a minimum of $25,000.
What should you use a money market account and savings account for?
Both MMAs and savings accounts are great places to park you hard earned cash safely. Indeed, they are great places for short term goals like:
Emergency fund: If you’re saving money for a rainy day such as a loss of job, paying medical bills, major car repairs, an MMA or savings account is a good place to do it. The reason is because the money is safe there and you have quick and easy access to it. According to experts, you should have at least 3 to 6 months of living expenses in that fund.
Down payment: Savings accounts and money market accounts are great places for a down payment on a house.
Other popular reasons for saving money in a savings accounts and MMAs are for large purchases such as a car or vacation.
Deciding on a money market account and a savings account depends largely on what is important to you. For example, are you looking for a better interest rate? If so, an MMA is a better choice.
However, if one of your concern about whether you choose an MMA or a savings account is liquidity, then a savings accounts may be appropriate.
Another factor to consider is how frequently you will need to access your funds. Both accounts however are safe. They are both insured by the federal government up to $250,000.
One thing to keep in mind, however, these accounts generally offer interest rates that are inferior to other investments such as mutual funds or stocks are offering.
For that reason, use these accounts for short-term solutions.
Speak with the Right Financial Advisor
- If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
- Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.