Money Market Account vs. High-Yield Savings: Here’s How To Choose

Money market accounts and high-yield savings accounts both typically earn solid interest rates on deposits, making both a great choice for stashing emergency funds. In that case, how do you choose between a money market account vs. a high-yield savings account? To help you make your decision, compare the main differences between these two account types, including how they work and their pros and cons. The best account option for you will depend on how much you have and how often you need to access your funds, among other factors.

Money market vs. high-yield savings

A money market account (MMA) is a deposit account that pays interest while blending some features of both savings and checking accounts. It can be a convenient place to keep a larger chunk of money, like a down payment for a house or car.

A money market account allows you to earn interest on your savings while retaining the freedom to write checks directly from the account. Some money market accounts even provide debit cards and allow ATM withdrawals. However, money market accounts often have higher minimum balance requirements (like $2,500, for example) and charge more in fees than a typical savings account.

High-yield or high-interest savings accounts don’t offer check-writing capabilities and may limit the number of monthly withdrawals, but they often have lower minimum balance requirements and may charge fewer or lower fees. If you’re working on building up your savings, a savings account could be a suitable place for your money.

Here are some key differences between the two types of accounts:

	Money market accounts	High-yield savings accounts
Account minimum	Can have a high account minimum or initial deposit	Often have low or no account minimum or initial deposit
Fees	May charge monthly fees if account minimum isn’t met	Typically charge zero or low monthly fees
Interest rates	Usually higher than traditional savings accounts Might be lower than a certificate of deposit	Usually higher than traditional savings accounts Comparable to money market accounts
Spending methods	Often allow check writing May come with a debit card	Don’t allow check writing Don’t offer a debit card May require a linked checking account
Best for ...	Saving wealth while being able to write checks and make payments directly from the account	Building savings while earning higher interest than traditional savings accounts

How do money market accounts work?

When you deposit funds in a money market account, the bank pays you periodic interest, often with a variable interest rate. You retain the right to withdraw your funds, and you can usually use a checkbook or debit card to draw on the account.

Money market accounts are useful if you need immediate access to your funds. You don’t need to spend time making a withdrawal or transferring money to a checking account first.

Money market account vs. money market fund

Money market accounts are not to be confused with money market funds, which are a type of mutual fund investment. Money market funds are designed to provide returns on your money, but they are subject to market risk since the funds invest in securities.

In contrast, money market accounts are a depository financial product similar to normal bank accounts. They are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), depending on whether your account is at a bank or a credit union. Money market funds are not FDIC-insured.

Benefits and limitations of money market accounts

According to the FDIC, the average national annual percentage yield (APY) on money market accounts is 0.67% (as of 7/02/24), although some accounts offer higher rates.

Money market accounts often also have higher account minimums than savings or checking accounts, with some accounts requiring four-figure or even five-figure balances to earn the best interest rates.

Although you can make as many deposits as you’d like, some banks limit the number of monthly withdrawals you can take from the account. This limit is generally up to six before incurring penalties or fees.

Our recommended money market accounts

If a money market account sounds like a good fit for your needs, here are some of our recommendations:

• The Idabel National Bank: This institution has been in business for over 100 years. Its money market account offers a $1 minimum deposit, no fees, and a 4.45% APY that’s well above average.⁷
  Visit Idabel National Bank
• Discover® Bank: Perhaps best known for its credit cards, Discover also offers a range of banking products. The Discover® Money Market Account earns up to 3.75% (as of 11/21/24) APY, depending on the account balance. There is no minimum opening deposit requirement for a Discover money market account and no account-related fees.
  Read our Discover Bank review | Visit Discover Bank
• Ally: Ally offers a money market account with no monthly maintenance fees and no minimum balance requirements. It has a 4.00% (as of 10/28/24) APY, and there’s no minimum to open an account.
  Visit Ally

How do high-yield savings accounts work?

High-yield savings accounts are a type of savings account. They are similar to regular savings accounts, except they offer a higher interest rate. High-yield savings accounts are insured by the FDIC as well.

When you put money into a standard savings account, you may only earn a fraction of the interest you could make in a high-yield savings account. The average national APY on a regular savings account is 0.45% (as of 10/21/24), according to the FDIC’s data. However, some of the country’s biggest banks pay even less than that, and charge you monthly account fees, too.

Interest rates for high-yield savings accounts

High-yield savings accounts usually offer much higher rates. The APY for some of the best high-yield savings accounts ranges between 4.25% to 5.31% in August 2024. Many high-yield savings accounts are offered through online banks rather than traditional brick-and-mortar banks. These online banks tend to have less overhead and can offer better rates.

Keep in mind that the APY for a high-yield savings account is usually variable, meaning it changes with market conditions. If the Federal Reserve raises or lowers the target federal funds rate, for example, interest rates on high-yield savings accounts typically follow suit.

High-yield savings accounts could be a good place to put your emergency fund or save for short-term goals like an upcoming vacation.

Our recommended high-yield savings accounts

If a high-yield savings account sounds like a good fit for your financial goals, here are some of our recommendations:

• The State Exchange Bank: This bank offers a solid 4.55% APY⁸. Like our other recommended accounts, funds are FDIC-insured. You can get started with a $1 minimum deposit.
  Visit The State Exchange Bank
• CIT Platinum Savings: This account offers an APY of 4.55% APY⁹ on balances of $5,000 or more. There are no monthly service fees, but you do need a minimum of $100 to open an account.
  Visit CIT
• Continental Bank: This bank offers a 4.41% APY with interest compounded daily. There are no fees and a $1 minimum deposit.
  Visit Continental Bank

Where both bank account types excel

Whether you choose a high-yield savings account or a money market account, some of the benefits will be pretty similar: earning interest, FDIC insurance, and some protection against inflation.

Interest on your deposits

Both money market accounts and high-yield savings accounts offer easy access to your money with higher earning potential than a checking or traditional savings account.

Some banks offer their highest APY on money market or high-yield savings accounts with big account balances, with lower-tier balances earning less interest.

Other banks might offer the highest rates for balances up to a certain limit and offer lower APYs above that balance tier. If that’s the case, it could make sense to open more than one savings account to avoid the limit and maximize your earnings.

FDIC insurance

Money market and high-yield savings accounts are automatically FDIC-insured for up to $250,000 per person, per bank, per account type. For joint accounts, each person on the account is insured up to $250,000.

Support against inflation

The higher APY you earn with money market accounts and high-yield savings accounts may help you maintain the value of your saved money during times of inflation.

For example, some money market and high-yield savings accounts offer interest rates of around 4% or 5% (as of August 2024). That’s higher than the 2.9% inflation rate recorded by the U.S. Bureau of Labor Statistics in July 2024.

Additional features

Money market and high-yield savings accounts offer greater flexibility and access to your money than a certificate of deposit (CD) or investments in the stock market. CDs lock up your cash for a period of time, and you could pay a penalty for withdrawing your funds early. Stock market investments require you to sell your investments to get your cash, which can take time and may not return the value you originally invested.

Money market and high-yield savings accounts welcome an unlimited number of deposits but are subject to federal regulatory rules that can cap withdrawals. Although these limits were suspended in 2020, financial institutions can make their own rules about withdrawals or impose fees for going over maximum withdrawal limits.

5 important differences between money market and high-yield savings accounts

Although money market and high-yield savings accounts are similar in many ways, there are some distinct differences.

Depending on your initial deposit amount and what you intend to use those funds for, these five differences might help you determine the account type of account that’s right for your financial goals.

1. Account minimums

Money market accounts often have high minimum balance requirements. Depending on the specific account, you may need to have thousands of dollars available to deposit.

High-yield savings accounts tend to have zero or low account minimums, and by doing some research, you might find a bank offering high-yield savings accounts with APY rates close to or even slightly above most money market accounts.

Winner: High-yield savings accounts. They often don’t require high minimum deposits, making them more accessible to everyone.

2. Competitive rates

Money market accounts and high-yield savings accounts typically earn similar interest rates.

The national average APY for a money market account is 0.67% (as of 7/02/24), while some high-yield savings accounts are offering between 0.40% to 2.00%. These rates vary, and they depend on the specific account you open.

Winner: Tie. Both money market accounts and high-yield savings accounts offer competitive rates compared to traditional checking and savings accounts. Researching the account you might open would give you a clearer picture of how it compares to other products in the market.

3. Access to your money

A money market account offers more immediate access to your funds since you might be able to write checks or have access to a debit card. On the other hand, you can often connect a high-yield savings account to your checking account, which allows for transfers, though you must wait for the deposit to hit your checking account before you can spend it.

If you’re prone to impulse buys or spending beyond your means, the extra time it takes to transfer money from high-yield savings to your checking account might be a good buffer for protecting your cash.

Winner: Money market accounts. They tend to offer faster access to your funds (but this could be an undesired feature based on your spending habits).

4. Fees

In general, money market accounts tend to have more potential maintenance fees than the average high-yield savings account.

You’re more likely to be required to keep a minimum daily balance on your account, and if you drop below that amount, you may be charged a fee. You may also be subject to fees if you go over the monthly withdrawal limits. Be sure to read any fine print before opening an account.

High-yield savings accounts tend to charge zero fees for maintaining a low account balance, although some do have minimum requirements. Pay attention to the fine print and fee schedules for each type of account as you shop around for the best banks.

Winner: High-yield savings accounts. They’re more likely to have zero or low fees.

5. Access to physical locations

Although some money market accounts are offered through online banks, many are available at national banks with brick-and-mortar locations. If you want to visit a local branch or make a withdrawal in person and still earn higher interest rates, you may be better off with a money market account.

High-yield savings accounts with the highest APY are usually found at online banks. Online banks don’t have the same overhead costs as conventional banks, so they can pass those savings on to customers through better rates.

Winner: Money market accounts. You’re more likely to find a bank with physical branches offering money market accounts than high-yield savings accounts.

Which bank account should you choose?

Choosing between a money market and a high-yield savings account depends on your specific needs and goals, so you’ll need to figure out what is a priority for you.

Choosing a money market account

Money market accounts may be a better fit for people who:

• Have a higher savings balance
• Want easy access to funds through checks or debit cards
• Can meet money market account minimums
• Can afford higher fees

If you are saving to make a big purchase and you can meet the account minimums, a money market could offer high interest rates while allowing direct access to your money.

Choosing a high-yield savings account

High-yield savings accounts could be the right choice for people who:

• Have a lower savings balance
• Don’t want minimum balance requirements
• Want to avoid or minimize fees
• Don’t mind leaving their money to grow

With a high-yield savings account, you could earn a high interest rate on your money even if you have a lower balance. The zero or low minimum balance requirements on some high-yield savings accounts also mean that you could break up your money into more than one savings account for various goals. You could have different accounts for vacation funds, sinking funds, emergency funds, and more.

FAQs

Bottom line

Both money market accounts and high-yield savings accounts offer a safe way to save and let you earn a higher APY than you could with a traditional savings account. The right one for you depends on how much you have saved and how easily you’d like to access your cash.

While finding the highest interest rates may seem like the most important thing, don’t chase the best rate without giving your money time to grow.

Do your research by checking out which money market and high-yield savings accounts currently offer the best rates with the features you need. We've compiled a list of the best money market accounts and best savings account recommendations to help you find the right fit.