Money Market vs. High-Yield Savings: Where are the Best Rates?

Having money on hand in case of an emergency allows you to avoid going into debt when you have an unexpected car repair or medical bill. A traditional savings account keeps your money safe and offers convenient access, but it doesn’t usually give you the best interest rates.

Thankfully, there are other options available. Money market accounts and high-yield savings accounts typically provide higher interest rates on your deposits than the average savings account. These accounts might be a good place to keep your emergency fund or other savings.

While there are several similarities when comparing money market accounts versus high-yield savings accounts, there are some important differences as well. Let’s explore what makes each one distinct.

Money market vs. high-yield savings

A money market account is a deposit account that pays interest while blending some features from savings accounts and checking accounts.

A money market account allows you to earn interest on your savings but still be able to write checks directly from that account. Some money market accounts even have debit cards and allow ATM withdrawals.

Before you jump right in, though, note that many money market accounts have higher minimum balance requirements and might have more fees than a typical savings account.

On the other hand, high-yield or high-interest savings accounts don’t offer the check-writing ability, but they often have lower minimum balance requirements. If you’re working on building up your savings, they 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	Might have a high account minimum or initial deposit	Might have zero or small account minimum
Fees	Might charge monthly fees if account minimum isn’t met	Might 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	Might allow check writing Might come with a debit card	Might not allow check writing Might not offer a debit card
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?

Money market accounts (MMAs) are a blend of features from both checking and savings accounts. They could often be a convenient place to keep a larger chunk of money, like a downpayment on a house or car.

Because of the access to debit cards and check writing abilities, these accounts may be helpful 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

Not to be confused with money market funds, a type of mutual fund investment, money market accounts are a depository financial product similar to normal bank accounts.

Unlike money market funds, money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) depending on if your account is at a bank or a credit union. They usually offer higher interest rates than regular savings accounts.

Benefits and limitations of money market accounts

According to the FDIC, the average national annual percentage yield (APY) on money market accounts is 0.65% (as of Sep. 20, 2023), although several accounts could offer higher rates.

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

Although you can make as many deposits as you’d like, there are typically limits to the number of monthly withdrawals you could 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, 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.

  Visit Idabel National Bank

• Discover Bank: Perhaps best known for its credit cards, Discover also offers a range of banking products. Its money market accounts have APYs ranging from 3.90%-3.95% (as of Jun. 15, 2023) depending on your account balance. There is a minimum opening deposit requirement of $2,500.

  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 May 9, 2023) 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 also offer a higher interest rate than traditional accounts. 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 Sep. 20, 2023), according to the FDIC’s data. However, some of the country’s biggest banks might pay even less than that.

Interest rates for high-yield savings accounts

High-yield savings accounts usually offer much better rates. The APY for some high-yield savings accounts ranges between 0.40% to 2.00% in August 2022. 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 could offer better rates.

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

But as you save money in a high-yield savings account, be sure to look out for changes in the APY you earn since they usually move when the Federal Reserve changes its interest rates.

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 an impressive 5.05% APY. 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: This account offers an APY of 5.05% APY¹ 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

What both bank accounts excel at

In your search for the account that fits you the most, high interest and ease of use are probably top of the list of required account features.

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.

Interest rates might be variable on both types of accounts, meaning they might change as the cost of borrowing changes.

Some banks may offer the highest APY for money market accounts or high-yield savings accounts in exchange for larger balances or setting up direct deposit of your paycheck. This might mean that smaller account balances might earn less interest.

On the other hand, some banks might pay their highest interest tier on balances up to a certain limit. This high-interest balance cap might be more common for high-yield savings accounts than money market accounts.

Balances higher than that limit would receive a smaller APY, which might be a reason to open more than one savings account. Having more than one account might allow you to avoid the limit some accounts might have on balances that earn high interest.

FDIC insurance

Money market and high-yield savings accounts are FDIC insured for up to $250,000 per person, allowing the insurance coverage to stack for joint accounts. This insurance would cover you up to that limit if your bank or credit union was to fail for some reason.

Support against inflation

Money market accounts and high-yield savings accounts offer a higher APY than traditional checking and savings accounts. This may aid you in maintaining some of the value of your saved money during times of increased inflation.

Some money market and high-yield savings accounts offer interest rates of 0.80% or even 2.00% (as of August 2022). This might not compete with the current inflation rate but could help combat it to some degree. For context, the inflation rate was at 8.5% in July 2022.

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 and stock investments lock up your cash in financial products for a period of time. You might not be able to access your money without selling your stocks or waiting for the CD to reach its term.

Money market and high-yield savings accounts welcome an unlimited number of deposits but are subject to federal regulatory rules, which usually cap withdrawals at six per month. The limits were suspended due to the COVID-19 pandemic, but financial institutions might 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

Money market and high-yield savings accounts are similar in many ways, but 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 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 0.65% (as of Sep. 20, 2023), 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: 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, a high-yield savings account would often connect to a checking account, and you may need to transfer the money into your checking account to spend it.

While this may delay accessing funds, if you’re prone to impulse buys or spending beyond your means, the extra time it takes to transfer money to your checking account might be a good buffer protecting your savings account.

Winner: Money market accounts tend to offer faster access to your funds. This might be beneficial in some situations but 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 might be more likely to have zero or low fees.

5. Access to physical locations

Some money market accounts might be offered through online banks that don’t have physical locations, but many are offered through national banks with brick-and-mortar locations. If you want to visit a local branch or make a withdrawal in person and still earn the higher interest rates, you may be better off with a money market account.

High-yield savings accounts with the highest APY are usually offered by online banks rather than the traditional brick-and-mortar locations. Online banks don’t have the same overhead or costs of maintenance as conventional banks, so they can pass those savings on to customers through better rates.

Winner: Money market accounts could be more likely to be offered by a bank that has physical locations.

Which bank account should you choose?

Choosing between a money market and a high-yield savings account depends on your specific needs and goals. Many institutions might offer both money market accounts and high-yield savings accounts, although individual rates are likely to vary from bank to bank.

Choosing a money market account

Money market accounts might be a better fit for people with higher savings balances who want a place to earn more interest than a traditional savings account. Money market accounts might provide checks and debit card access, making it easier to access your funds.

If you are saving to make a big purchase and you could 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

If you’re just beginning your savings journey or don’t yet have enough to meet the minimum balance requirements on a money market account, opening a high-yield savings account might be a better fit.

You could earn a high interest rate on your money with 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, emergency funds, and more.

FAQs

Bottom line

Both money market accounts and high-yield savings accounts offer a safe way to save and have various features that make them worth signing up for.

Finding the highest interest rates may seem like the most important thing, but be wary of moving your money from account to account, chasing 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. You could also explore our best savings account recommendations to explore what option fits your personal finance needs.

Disclaimer: All rates and fees are accurate as of May 9, 2023.