Money Market Account vs. Savings Account

Saving money is a cornerstone of financial planning. Living below your means and paying yourself first can help you build a solid financial future. But how and where you store your savings is (almost) as important as budgeting for savings in the first place. 

Not all savings products are equivalent, and you’ll likely get the most value from an account that fits your financial situation and goals.

Two popular options are basic savings and money market accounts. While these accounts have some similarities, there are also several differences to weigh when deciding which one is right for you. The good news is we’re here to help. Here’s what you need to know.

Feature	Money Market Account	Savings Account
Initial Deposit	May be higher	May be lower
Minimum Balance	Typically higher	Typically lower
Interest Rates	Generally higher, may be tiered based on account balance	Typically lower
Access to Funds	May have limited check writing ability, may come with a debit card	Typically no check writing, may have an ATM card
Transaction Limits	Typically 6 withdrawals per month without penalty	Typically 6 withdrawals per month without penalty
FDIC Insurance	Insured up to federal limits	Insured up to federal limits
Monthly Service Charges	Typically higher but often avoidable by maintaining a minimum balance	Generally lower, sometimes avoidable by meeting account requirements
Tax Implications	Interest earned is taxable	Interest earned is taxable

Ease of Access To Funds and Transaction Limits

Money market accounts typically combine the benefits of both a checking account and a savings account, offering flexibility in accessing funds. They pay interest like a savings account but may provide a debit card or the ability to write checks — features not usually available with a standard savings account. The easy access may make money market accounts more convenient for managing larger, recurring expenses directly from your savings.

Standard savings accounts are more restrictive regarding access to funds. They typically do not offer a debit card or check-writing privileges but may provide an ATM card for cash withdrawals.  

Banks may limit the number of free withdrawals per month for both types of accounts. While federal law no longer dictates monthly withdrawal limits for money market and savings accounts,^[1] many banks and financial institutions have maintained a limit of six withdrawals per month. Exceeding this limit may result in withdrawal fees, which can diminish savings over time.

Interest Rates

Money market accounts generally offer higher interest rates compared to traditional savings accounts, making them an attractive option for individuals looking for ways to grow their savings efficiently. Interest rates are often tiered, meaning the rate increases as the account balance grows, incentivizing savers to maintain a higher balance. Banks may also have specific requirements to receive the highest rates, such as maintaining a minimum balance, linking to another account, or setting up a monthly direct deposit.

Standard savings accounts typically provide lower interest rates than money market accounts. They're designed for ease of use and accessibility rather than maximizing returns. The interest rates are typically fixed and do not vary with the amount deposited, making standard savings accounts simpler but potentially less lucrative over the long term.

Both account types accrue compound interest, usually on a monthly or quarterly basis. Earning interest on the money you’ve deposited and the interest that has already been added to the account can help your savings grow faster over time, essentially earning interest on interest.

FDIC Insurance

Money market and basic savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to the legal limit. This insurance protects investors against a bank failure, providing security for deposited funds. Whether you choose a money market or traditional savings account, you’ll know your savings are protected under the same federal guidelines. 

Tax Implications

Both money market accounts and savings accounts have similar tax implications. The Internal Revenue Service (IRS) considers the interest earned on these accounts taxable income. At the end of each year, savers must report interest earned on both types of accounts on their tax returns.

Your bank or financial institution will typically send a Form 1099-INT if you earn more than the minimum amount specified by the IRS. This form details the interest you've earned throughout the year and must be included when you file your taxes.

Other Accounts To Consider

Exploring other options beyond money market and savings accounts can help diversify your savings strategy. Depending on your savings goals and how much access you need to funds, a certificate of deposit (CD) or high-yield savings account may offer additional interest-earning opportunities.

CDs

Certificates of deposit typically pay higher interest rates in exchange for leaving your funds in the account for a predetermined period of time. The periods may range from several weeks to several years, with longer terms typically paying higher rates. This may make CDs an attractive option for those who do not need immediate access to savings and wish to grow their funds at a higher rate.

Since CDs have fixed interest rates, they provide a predictable return. They’re also insured by the FDIC up to the legal limit, the same as savings and money market accounts. However, it’s important to keep in mind that withdrawing funds from a CD before the maturity date may result in penalties, which may diminish your earnings.

High-Yield Savings

High-yield savings accounts are similar to traditional savings accounts. However, they offer higher interest rates, allowing your savings to grow faster. They provide safety and liquidity, similar to a standard savings account. Still, some high-yield savings accounts may require a higher minimum balance to earn the advertised rate or avoid monthly fees. 

The interest rate on high-yield savings accounts is often variable and may change based on the economic environment and federal interest rates. High-yield savings accounts are often appropriate for savers who can maintain the required minimum balances and adapt to variable rates.

Which Account Is Right for You?

Basic savings accounts are ideal if you don’t have a lot of experience saving and need a simple and convenient way to start. A low minimum balance, no required initial deposit, or minimum balance requirements make it easy to set up and maintain a savings account, even if you’ve never saved before. This can enable you to start building good savings habits. If you're a minor, a new grad, working your first job, or living paycheck to paycheck, a standard savings account is likely the right step for you.

Standard savings accounts are also an appropriate choice if you’re looking for an account to link to your checking account for overdraft protection. When there's an insufficient balance in your checking account, the bank can transfer funds from your linked savings account, helping you avoid declined transactions or bounced checks.

Money market accounts are ideal if you're an established saver and want to get more from your savings. Higher base interest rates and a tiered rate system help you earn more interest as your savings grow.

In some cases, you may benefit from holding both types of accounts. Consider using a standard savings account for smaller, specific goals or for overdraft protection and opening a Premiere Money Market Account to grow larger savings balances faster.

Money Market Account vs Savings Account: The Bottom Line 

When comparing money market accounts to standard savings accounts, keeping the key differences in mind is important. Money market accounts generally offer higher interest rates, more flexible access to funds, and additional features like an ATM card or check-writing privileges. Standard savings accounts are simpler, with low to no minimum balance requirements, making them more accessible for those just starting their savings journey.

No matter what your savings goals are, the professionals at PNC Bank are here to help. Explore PNC Bank’s savings solutions, and begin planning for a bright financial future today.