"Money market" is one of the most confusing labels in personal finance, because it names two very different products. One is a bank account. The other is an investment fund. If you are choosing a place for cash, the first thing to settle is which one an account actually is. This guide compares a money market account with a regular savings account, explains how deposit insurance applies, and shows how to tell either of them apart from a money market fund.

This article is general information, not personalized financial advice. Features, rates and fees differ by bank and credit union, so check the account agreement before you open anything.

The short answer

A money market account (sometimes called a money market deposit account, or MMDA) and a savings account are both deposit accounts at banks or credit unions. According to the Consumer Financial Protection Bureau (CFPB), money market accounts tend to pay higher interest rates than other types of savings accounts, but a money market account might require a minimum deposit and usually limits the number of transactions you can make by check, debit card or electronic transfer. The FDIC describes a traditional savings account as a place to set money aside that earns some interest, and notes that savings accounts usually limit withdrawals too. Minimums and limits for both vary by institution.

Both are generally covered by deposit insurance when held at an insured institution. A money market fund is not.

Money market account vs savings account at a glance

Feature Money market account Savings account
Where you get it Bank or credit union Bank or credit union
Interest Tends to pay more than other savings accounts (CFPB) Varies by institution
Minimum deposit May require a minimum; FDIC says MMDAs generally require a higher initial deposit and minimum balance than other savings accounts Varies by institution
Check writing / debit card Debit card or checks can be offered, with a limit on the number of monthly withdrawals (FDIC); CFPB says check, debit card and electronic transfer transactions are usually limited Varies; check the account terms
Deposit insurance FDIC (banks) or NCUA (credit unions), up to the standard limit Same
Typical purpose Cash you want to keep reachable, sometimes with check or debit access Money set aside that you do not expect to need regularly (FDIC)

"Often" and "may" matter here. Every institution sets its own terms, so a given savings account can pay more than a given money market account. Compare actual offers rather than assuming one account type always wins.

How a money market account works

The CFPB explains that money market accounts are offered by banks and credit unions. Three features set them apart:

  • Interest. The CFPB says they tend to pay higher interest rates than other types of savings accounts, though rates vary by institution and can change over time.
  • Minimums. Some require a minimum deposit to open the account or to earn the advertised rate. Check whether the rate drops below a certain balance.
  • Transaction rules. The CFPB states that banks and credit unions usually limit the number of transactions you can make by check, debit card or electronic transfer, while you can usually make unlimited withdrawals and payments at an ATM, in person, by mail or by phone.

Because some money market accounts come with a debit card or paper checks, people sometimes use them like a hybrid between savings and checking.

How a savings account works

A savings account is a deposit account used to set money aside that you do not expect to need regularly. Compared with a money market account, the FDIC notes that a money market deposit account offers more ways to access your money. Our guide to high-yield savings accounts versus regular savings accounts goes through how rates differ between traditional and online savings.

About the "six withdrawals a month" rule

For many years, federal rules for savings accounts included a limit of six convenient transfers or withdrawals per month. On April 24, 2020, the Federal Reserve Board announced an interim final rule removing that limit from the definition of a savings deposit, allowing banks to immediately suspend enforcement of it. Banks were allowed to suspend enforcement, not required to, and what a particular bank does is set out in its account terms, so check them.

Is a money market account FDIC insured?

A money market deposit account held at an FDIC-insured bank is covered by FDIC insurance. The FDIC lists checking accounts, savings accounts, money market deposit accounts and certificates of deposit among the deposit products it insures. At credit unions, the National Credit Union Administration (NCUA) provides comparable coverage for member accounts, and the CFPB says money market accounts at both banks and credit unions are insured up to $250,000 held by the same owner or owners.

Several details are worth knowing:

  • The limit is per depositor, per ownership category, per insured bank. The FDIC says it insures deposits to at least $250,000 per depositor, per ownership category, at each FDIC-insured bank. Single accounts, joint accounts, retirement accounts and trusts are examples of different categories.
  • Balances at one bank add up. The FDIC says all of your deposits in the same ownership category in the same FDIC-insured bank are added together. Its own example combines a checking and a savings account held in single ownership; money market deposit accounts in the same category are deposits too, so they count toward the same limit.
  • Check that the institution is insured. Insurance depends on the bank or credit union, not on the label of the account. For what happens in a failure, see our article on what happens when an online bank fails, and for a wider look at safety, is your money safe in online banks.

Money market account vs money market fund

This is the point where people get caught out.

A money market fund is a type of mutual fund. The CFPB says a money market mutual fund account is considered an investment, and it is not a savings or checking account, even though some money market funds allow you to write checks. The CFPB also notes that mutual funds are offered by brokerage firms and fund companies and follow different regulations. Its money market page points to the Securities Investor Protection Corporation (SIPC) for information about money market mutual fund accounts if a brokerage firm fails. Check any fund's disclosures to see what protection applies.

The FDIC also states that not all products offered by banks are covered by deposit insurance. Non-deposit investment products, including stocks, bonds, mutual funds and annuities, are not covered, even those offered by FDIC-insured banks.

A quick test before you deposit: ask, "Is this a deposit account at an FDIC-insured bank (or an NCUA-insured credit union)?" If the answer is no, you are looking at an investment product, and the risk profile is different.

How to choose

Neither account is better in every case. These questions help:

  1. Do I need check writing or a debit card for this money? If yes, a money market account may fit better. If no, a savings account may be enough.
  2. Can I meet the minimum balance? If an account pays its top rate only above a threshold, calculate whether you will stay above it.
  3. What are the transaction limits and fees? Read how many transfers, checks or debit transactions are allowed, and what happens if you go over.
  4. What is the current rate and could it change? Regulation DD defines a variable-rate account as one whose interest rate may change after the account is opened. The CFPB notes that money market rates can change, so a rate that looks strong today may not last; check the account terms to see whether the rate is variable.
  5. Is my total at this bank within the insurance limit? If your combined balances in one ownership category approach $250,000, consider spreading them across insured institutions or ownership categories.

For a place to start comparing, see our list of best high-yield savings accounts and our walk-through for how to open an online bank account.

Common mistakes

  • Assuming "money market" always means insured. A money market mutual fund account is considered an investment, not a deposit account.
  • Chasing a promotional rate without reading the conditions. Check minimums, tiers and how long a rate applies.
  • Forgetting that balances combine. Deposit accounts at one bank in the same ownership category count toward one insurance limit.
  • Using an account with transaction limits for everyday spending. Check the account agreement for what happens if you go over a limit.

Bottom line

When held at insured institutions, both are insured deposit accounts at banks and credit unions. The money market version often pays more and may offer check or debit access, with minimums and transaction limits as the trade-off. A savings account is a more basic deposit product. A money market fund is neither; the CFPB calls it an investment. Compare real offers, read the account agreement, and confirm the institution's insurance before you move your money.

Sources

  • CFPB, "What is a money market account?" https://www.consumerfinance.gov/ask-cfpb/what-is-a-money-market-account-en-1007/
  • FDIC, "Are My Deposit Accounts Insured by the FDIC?" https://www.fdic.gov/resources/deposit-insurance/financial-products-insured
  • FDIC, "Understanding Deposit Insurance." https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance
  • FDIC Consumer News, "Savings Are Great for Short-Term Goals Too" (September 2018). https://www.fdic.gov/consumers/consumer/news/september2018.html
  • CFPB, Regulation DD, 12 CFR 1030.2 definitions (variable-rate account). https://www.consumerfinance.gov/rules-policy/regulations/1030/2/
  • Federal Reserve Board press release, April 24, 2020 (Regulation D interim final rule on the six-transfer limit). https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200424a.htm