Money Market Account vs. Savings Account: Which Is Better?

What Is a Money Market Account?

A money market account (MMA) is a deposit account that earns interest and also allows limited debit or check transactions. Money market accounts typically have higher interest rates than regular savings accounts and may even be competitive with high-yield savings accounts.

Although they aren't an ideal replacement for checking accounts, MMAs can be a helpful hybrid when you want the ability to make direct payments from your savings account.

Some MMAs have minimum balance requirements and/or tiered rates that require you to keep a certain amount of money in your account to qualify for the best yields. Some accounts also limit electronic transfers, checks and debits to six per month.

Tip: There's a third option with a potentially confusing name. A money market fund is a mutual fund that invests in low-risk, short-term assets. It's different from a money market account, which is a bank or credit union account that pays interest.

Pros and Cons of a Money Market Account

Money market accounts have specific pros and cons, especially when compared to regular or high-yield savings, regular checking or investment accounts. Here's a quick rundown of things to consider:

What Is a Savings Account?

A savings account is a deposit account that's designed to hold cash reserves, such as your emergency fund, long-term savings and savings for individual goals. Savings accounts earn interest like money market accounts, but they typically don't come with check-writing or debit capabilities. You can access your money by making an in-branch or ATM withdrawal, or by transferring funds electronically to your checking account. In some cases, you can use autopay to pay bills from your savings account.

Regular savings accounts typically pay much lower interest rates than money market accounts. However, high-yield savings accounts, available from many online banks, often offer higher annual percentage yields (APYs) than both regular savings and money market accounts.

Pros and Cons of a Savings Account

Savings accounts are a safe place to hold your cash. However, there are differences between regular and high-yield savings, and pros and cons to both.

Learn more: How to Choose a High-Yield Savings Account

Money Market Account vs. Savings Account

Money market and high-yield savings accounts share many of the same features. Both pay higher-than-average interest rates and offer easy access to your money when you need it. Neither offers the potential returns that investing can, but they don't carry the same risk of loss either.

The primary difference between money market and high-yield savings accounts is the ability to write checks or use a debit card. If you have a specific purpose in mind for these features, a money market is a fine choice. You could, for example, use a money market to accumulate property taxes, home insurance payments and home repair and improvement funds. Earn interest on your balance as it grows and use your money market to pay for these periodic expenses as well as unexpected repairs or planned improvements as they arise.

Should You Choose a Money Market Account or a Savings Account?

If you don't need to make direct payments from your account, choose the option with the highest yield and lowest (or least restrictive) fees. In many cases, this will be a high-yield savings account, but always check and compare. Since both types of accounts can come with minimum balance requirements and various fees, also read the fine print.

When to Consider Choosing a Money Market Account

All things being equal, a money market account might be the better choice if these descriptions apply to you.

• You want a higher APY than a regular savings account. You might as well earn the best possible yield on your savings. With a little shopping around, you can find a money market account that pays multiple times what traditional savings will.
• You want to use a debit card or checks to make purchases or pay selected bills. Being able to make direct payments from your money market account adds a level of flexibility. For large bills—or in a true emergency—you won't have to fuss with transferring money to cover an expense.
• You're confident you can avoid excess transaction and other bank fees. Money markets have more restrictions and fees than checking accounts. Before you choose a money market, make sure you won't inadvertently trigger fees during normal use.
• You can meet minimum balance requirements. Study up on minimum balance requirements so you don't accidentally end up with a low-yield account.

When to Consider Choosing a Savings Account

A high-yield savings account could be the best option if you fall into any of these categories:

• You're saving for long-term goals, not immediate needs. If making payments from your savings account isn't a priority for you, a savings account will work as well as a money market account and may earn you a higher yield.
• You want more flexibility than you get from a CD. A CD has the advantage of a high interest rate that's fixed and doesn't fluctuate. However, if you access your money before your CD term is up, you may forfeit some interest as an early withdrawal penalty.
• You're comfortable with money transfer options. Transferring money between banks can take up to five days, but this time frame varies, so ask. If you're worried about speed, you might consider opening a checking account at the same bank as your high-yield savings; same-bank transfers are usually completed the same day.
• You want the highest available interest rate. A regular savings account generally won't come close to the APY you can get on a money market or high-yield savings account—and high-yield savings accounts often edge out MMAs. When you want the highest yield, period, high-yield savings should at least be in your consideration set.

The Bottom Line

Both money market and high-yield savings accounts are safe places to save your money and earn interest. With a little shopping around, you can find competitive interest rates, fees and minimum balance requirements that work for you, and money transfer or payment options that fit your needs. One place to start: Check these lists of the best money market accounts and best high-yield savings accounts to find one that suits you.