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Money Market vs High-Yield Savings Account: What Are the Differences?

Money Market vs High-Yield Savings Account: Key Differences
Rebecca Safier
Rebecca SafierUpdated March 29, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Both money market and high-yield savings accounts offer a safe place to store your extra cash and earn a higher-than-average interest rate. But there are some key differences between these two types of accounts. Money market accounts generally offer easier access to your money, while high-yield savings accounts usually come with fewer requirements and fees. Read on for a closer look at the difference between high-yield savings and money market accounts, plus tips on how to find the right savings account for your needs.

Understanding Money Market Accounts and How They Work

Money market accounts are savings accounts that offer some of the features of a checking account, such as checks and/or a debit card, making them a type of hybrid account. Found at banks and credit unions, these accounts usually offer a higher annual percentage yield (APY) than traditional savings accounts or interest-bearing checking accounts. They also typically come with higher initial and ongoing balance requirements than other types of savings accounts. If your balance goes below the minimum, you may get hit with a fee and/or earn a lower APY.Like other savings accounts, money market accounts typically limit the number of withdrawals you can make to six per month. While federal rules restricting savings account owners to six withdrawals per month have been suspended, banks and credit unions can still cap the number of monthly withdrawals you’re allowed to make and charge fees if you exceed the max.Also like other savings accounts, money market accounts are insured up to $250,000 (per account, per account holder, per institution) by either the National Credit Union Administration (NCUA) or Federal Deposit Insurance Corporation (FDIC). 

Benefits of Money Market Accounts

One of the biggest benefits of a money market account is that it usually pays a relatively high APY. The rates on money market accounts vary, but you can currently find APYs exceeding 3.00% or 4.00%. This rate is significantly higher than the average interest on a checking account (0.06%) and the average interest on a traditional savings account (0.37%). Another perk is that these accounts typically come with check-writing abilities and/or a debit card. This allows you to access your cash right away without needing to take the added step of transferring it to a checking account and making the payment from there.If you’re looking for an accessible place to store a large chunk of money, such as your emergency savings fund, a money market account could be a good option. You’ll be able to enjoy the higher APY and payment options without worrying about meeting the often high balance minimums.

Understanding High Yield Savings Accounts and How They Work

A high-yield savings account is a type of savings account that offers higher interest rates than a traditional savings account. They are typically offered by online-only  banks. These banks tend to have lower overhead costs than traditional brick-and-mortar banks, and pass that savings on to customers in the form of higher rates. They also typically charge low, or no, fees.A high-yield savings account may earn as much as 25 times the national average rate on standard savings accounts. These days, you can find high-yield savings accounts that are paying over 4.00% APY. You might also be able to find a high-yield savings account with no fees or minimum balance requirements.Like other savings accounts, high-yield savings accounts are federally insured up to $250,000. Also like other other savings accounts, you are usually limited to six withdrawals per month.

Benefits of High-Yield Savings Accounts 

High-yield savings accounts offer a way to keep your money safe while earning a higher-than-average return. In addition, you usually don't have to worry about fees or account minimums with this type of savings account. Unlike a money market account, however, a high-yield savings account doesn’t come with checks or a debit card (though, in some cases, you may get an ATM card). To make purchases using the money in a high-yield savings account, you’ll generally need to transfer the money to your checking account, and spend it from there.

Major Differences Between High-Yield Savings and Money Market Accounts

While money market accounts and high-yield savings accounts have some similarities, they also have some key differences to keep in mind:
  • Fees and account minimums Money market accounts typically come with higher fees and account minimum requirements than high-yield savings accounts, which may not charge fees or require a minimum balance. 
  • Access to your funds Money market accounts come with checks and sometimes a debit card; high-yield savings accounts do not.
  • Access to in-person banking Many traditional banks offer money market accounts, whereas high-yield savings accounts are more commonly found at online banks.
Money Market AccountHigh-Yield Savings Account 
APYTypically higher than a traditional savings account Typically higher than a traditional savings account
Fees and account minimumsOften higher than other types of savings accountsOften no fees or minimums 
Ability to write checks YesNo
Federally insuredYesYes

Similarities Between Money Market Accounts and High Yield Savings Accounts

Both money market accounts and high-yield savings accounts can be a good place to park your emergency fund or work towards a near-term savings goal (like going on vacation or buying a car). Both offer APYs that are higher than what you can find in a checking account or a traditional savings account, which helps your money grow over time. And both are federally insured up to $250,000. Neither account is designed for everyday spending, since there are typically restrictions on how many transactions you can make per month. And, since savings accounts (even high-yield savings and money market accounts) provide relatively low returns, neither vehicle is considered a good place to grow wealth or keep funds you intend to use for long-term goals like retirement or a child’s college education.

Are Money Market and High-Yield Savings Accounts Worth It? 

Whether a money market or high-yield savings account is worth it all depends on your financial situation and goals. A money market account could make sense if you can meet the account minimum and avoid racking up fees. It gives you easy access to your cash by offering checks and often a debit card. On the other hand, a high-yield savings account might be better if you want to avoid fees and minimum balance rules. You’ll just have to transfer your money to a checking account before you can use those funds to pay for something. Recommended: How Much Does the Average American Have in Savings?

Alternatives to Money Market and Savings Accounts

If you’re exploring alternatives to money market and high-yield savings accounts, here are some options you may want to explore.

Certificate of Deposit (CD)

A certificate of deposit (CD) is another type of account where you can stash your savings and earn a relatively high APY. Offered by banks and credit unions, a CD comes with a specific term length and a fixed withdrawal date (called the maturity date). You lock your money in for the term of the CD, which can range from six months to five years. CDs don’t have monthly fees, but you’ll typically pay a fee if you withdraw funds before the maturity date. Like other savings accounts, certificates of deposit are federally insured.

Money Market Funds 

Although they sound similar, a money market fund is not the same thing as a money market account. A money market fund is actually a type of mutual fund. It invests in liquid assets, like CDs and U.S. treasuries, and offers more accessible cash withdrawals than some other types of investment accounts. However, money market funds come with higher risk than savings accounts. Like any other investment, there is a chance that you could lose money. 

High-Yield Checking Account

A high-yield checking account is a checking account that pays a higher return than a standard checking account, and often a traditional savings account. These accounts typically impose requirements that you’ll need to meet in order to earn the high rate of return, such as maintaining a set minimum balance, receiving direct deposit into the account, or performing a minimum number of debit transactions each month. If you don’t meet the requirements, you may not get the advertised APY.

The Takeaway

Both money market and high-yield savings accounts are safe places to store your emergency funds and other savings, and allow you to earn an above-average APY.If you want check-writing abilities, a money market account could be a good choice. But if you prefer not to worry about fees and balance minimums, a high-yield savings account could be a better fit. Since rates and terms vary by institution, it can pay to shop around and look at multiple saving account options. With Lantern by SoFi’s online banking marketplace, it’s easy to compare high-yield savings accounts based on APY, fees, and balance minimums.Lantern can help you compare online savings accounts and find today’s best rate.

Frequently Asked Questions

Is a money market account also a savings account?
Can I be penalized for drawing money from a savings account vs a money market account?
Do money market accounts offer higher interest rates than savings accounts?
Is a savings account safer than a money market account?
Photo credit: iStock/Dilok Klaisataporn

About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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