Comparing Money Market Accounts and Savings Accounts: The Right Selection for You
In the world of banking, two popular deposit account options stand out: high-yield savings accounts (HYSAs) and money market accounts (MMAs). While both accounts earn interest, they differ in accessibility, fees, and potential returns.
Accessibility
High-yield savings accounts (HYSAs) generally allow withdrawals and transfers, although they may have limits on the number of monthly withdrawals. Typically, these accounts do not provide check-writing or debit card access. On the other hand, money market accounts (MMAs) offer check-writing and debit card access, providing easier day-to-day spending options. However, MMAs may also have withdrawal limits.
Fees
High-yield savings accounts usually come with no fees associated with the account itself. In contrast, money market accounts may charge fees related to the fund’s expense ratio or maintenance fees at some banks. The fees vary by institution, so it's essential to compare before making a decision.
APYs
Both account types offer competitive interest rates, but HYSAs generally offer significantly higher interest rates than traditional savings accounts. Rates for both accounts are variable and often competitive, with higher APYs available, especially from online banks. Money market accounts may offer comparable or slightly higher APYs than HYSAs, with some MMAs having tiered rates where higher balances yield better rates.
FDIC Insurance
High-yield savings accounts are FDIC-insured, protecting deposits up to applicable limits. Money market accounts are not FDIC-insured but are considered low risk.
Who Benefits More?
High-yield savings accounts may suit savers prioritizing safety, low risk, easy access for emergencies, and no check-writing needs. Money market accounts may appeal to those wanting slightly more flexibility for transactions (checks and debit cards) and potentially higher yields if comfortable with the absence of FDIC insurance and possible fees.
Notable Examples
Several online banks offer high-yield savings accounts with competitive interest rates and low or no monthly fees. For instance, E*TRADE Max-Rate Checking offers an APY of 3.00%, while Discover® CD offers an APY of 4.20% for a 6-month term. Sallie Mae Bank's Money Market Account offers an APY of 3.85%, while its High-Yield Savings Account offers an APY of 3.90%. The Zynlo Money Market Account offers an APY of 4.40%, and Vio Bank's Cornerstone Money Market Savings Account offers an APY of 4.31%, but it does not offer debit cards or check-writing capability.
In summary, high-yield savings accounts offer safer, fee-free accounts with competitive but variable rates and some withdrawal restrictions, but limited transactional access. Money market accounts provide easier access via debit and checks and may offer similar or slightly better APYs but have no FDIC coverage and possibly some fees. Your choice depends on your need for transaction access, risk tolerance, and rate preferences.
[1] Source: Investopedia [2] Source: Bankrate [3] Source: Forbes [4] Source: NerdWallet [5] Source: CNBC
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