What is a Money Market Account and How is it Different From a Savings Account? What is a Money Market Account and How is it Different From a Savings Account?

A Money Market Account, or MMA, is a type of deposit account that has some features that are traditionally associated with both Savings Accounts and Checking Accounts. Some banks and credit unions may refer to Money Markets as Money Market Savings Accounts. Generally, all Money Market Accounts share certain similar features -- like a traditional Savings Account they have an interest rate to help you earn interest and grow your savings and like a checking account they may also come with a debit card and checks to help you make purchases using the funds in your account. However, unlike a traditional checking account, many financial institutions will limit the number of transactions you can make with a Money Market account during a statement cycle. 

Quicklinks:

• How do Money Market Accounts Work?
• How is a Money Market Account Different From a Savings Account?
• How is a Money Market Account Different From a Checking Account?
• What are the Pros and Cons of Money Market Accounts?
• Are Money Markets FDIC Insured?
• What is the Difference Between a Money Market and a Money Market Fund?
• What Are Alternatives to Money Market Accounts?

Key Takeaways:

• A Money Market is a type of deposit account that has some features that are traditionally associated with both Savings Accounts and Checking Accounts.
• Money Markets offer an interest rate to help you grow your savings.
• They may also come with a debit card and checks to help you make purchases using the funds in your account.
• Funds are insured through the FDIC or NCUA. 

How do Money Market Accounts Work?

Money Markets are a type of bank account offered by most financial institutions. Depending on the financial landscape at the time of account opening, Money Markets can feature higher interest rates than a more traditional type of Savings Accounts. As mentioned above Money Markets often feature some of the benefits of Checking Accounts including debit cards to allow you to access your money by withdrawing funds from an ATM machine and writing checks to make payments from your account. Most financial institutions will require a minimum account balance to open and maintain a Money Market account -- for instance, Leader Bank only requires $10 to open a Money Market account and earn interest. And you can rest easy knowing that Money Market accounts are insured by the Federal Deposit Insurance Corporation (FDIC), so your funds will be covered up to $250,000. Plus, if you open a Money Market account with Leader Bank, you'll have access to additional FDIC insurance coverage for your Money Market account through the IntraFi Cash Service (ICS) network. 

How is a Money Market Account Different From a Savings Account?

There are several notable differences between Money Market and Savings Accounts, as well as several features in common between the two. Traditionally, one of the biggest advantages Money Markets have over Savings Accounts is that Money Markets often offer higher rates and thus pay interest at a higher rate. However, some high-yield savings accounts offer rates that are competitive (or even better than) with Money Market interest rates. It's also important to note that interest rates on Money Market accounts change with inflation, so it's important to do your research on the state of the market to determine which is the best rate available to you when considering what type of account to open. As mentioned above, MMAs also offer some benefits that don't come with a Savings Account -- namely the ability to withdraw funds and make purchases from your account with either a debit card or checks.

So when does it make sense to choose a Money Market Account over a standard Savings Account? If your bank or credit union is offering a higher interest rate on Money Market Accounts than Savings Accounts and you want to be able to make regular purchases and withdrawals, then a Money Market might make sense for you. 

How is a Money Market Account Different From a Checking Account?

Similar to their relationship with Savings Accounts, Money Markets share some notable similarities and differences with Checking Accounts. Like Checking Accounts, Money Market Accounts allow you to deposit funds whenever you want. Some financial institutions also issue account holders a debit card tied to Money Market Accounts so that you can withdraw cash from ATMs and make purchases at retailers. You'll also receive checks tied to your Money Market account to be able to make purchases using the funds in your account.

However, unlike a Checking Account, many financial institutions have limits on the number of transactions you can make from a Money Market each statement cycle (for instance Leader Bank allows six preauthorized, automatic, telephone, or third-party transfers for Money Market accounts each statement cycle). Another difference with Checking Accounts is that it's not uncommon for Money Markets to have minimum balance requirements (Leader Bank only requires $10 to open an account and earn interest). 

What are the Pros and Cons of Money Market Accounts?

We've covered some of the important similarities and differences between MMAs and both Savings and Checking Accounts, but what are some of the pros and cons of Money Markets?

Pros: 

• Better interest rates than standard Savings and Checking Accounts to help you maximize your savings.
• Easier access to funds than with a Savings or Certificate of Deposit Account. 
• Funds are insured through the FDIC or NCUA. 

Cons:

• Often have minimum balance requirements.
• Limited transactions per statement cycle.
• Interest rates may not be better than those for high-yield savings accounts. 

Are Money Markets FDIC Insured?

Yes! Money Market Accounts are covered by the FDIC on balance up to $250,000 per depositor (joint accounts are insured for $500,000). Plus, as mentioned above, at Leader Bank you can maximize access to FDIC coverage on your MMA through the IntraFi Cash Service network which helps to ensure balances up to $100 million per depositor are covered. 

What is the Difference Between a Money Market and a Money Market Fund?

You may have heard the term Money Market Mutual Fund or Money Market Fund before, and it's important to note that these are not the same as the type of Money Markets discussed above that are offered by banks and credit unions. Unlike Money Market Accounts, Money Market Mutual Funds are generally offered by brokerage firms and mutual fund companies, not banks or credit unions, and are not insured by the FDIC or NCUA. Some banks or credit unions do offer Money Market Mutual Funds, but these are not insured by the FDIC or NCUA either. Mutual Funds are a financial tool that invests in a variety of securities including stocks, bonds, government securities, and commercial paper. The advantage of a Mutual Fund is to give investors access to a diversified portfolio. However, Mutual Funds can gain and lose value along with the state of the market. 

What Are Alternatives to Money Market Accounts?

Not sure that a Money Market Account is the right choice for you, or want to explore other options to grow your savings before you make a decision? We've got you covered! We've already mentioned many of the common alternatives to MMAs above, but below we've outlined some of your other options in further detail:

• Standard Savings Account: Savings Accounts usually have no minimum balance requirements or monthly fees, and like MMAs they pay interest on your balance. The Leader Savings Account provides the very best in online savings to help you manage your finances on the go. 
• High-Yield Savings Account: Many financial institutions (including Leader Bank) offer High-Yield Accounts that have better interest rates than their standard Savings Accounts and even Money Market Accounts. Leader Bank's Zeugma Reward Savings Account is a high-yield account that comes with all of the benefits of an attached Zeugma Reward Checking Account to help you earn cash back and enjoy discounts at local retailers. 
• Standard Checking Account: If you just need easy and regular access to your money and aren't as worried about earning interest on your balance, a regular Checking Account might be the right option for you. The Leader Checking Account has no minimum required balance or monthly fees, plus it makes purchases and withdrawals easy with a free debit card and unlimited transactions at any participating SUM Network ATM.
• Reward Checking Account: As mentioned above, Leader Bank's Zeugma Reward Checking Account helps you earn cash back on debit card purchases, offers ATM fee reimbursements, and discounts at local retailers. Plus, you'll get all the benefits of the attached high-yield Zeugma Reward Savings Account.
• Certificate of Deposit: A Certificate of Deposit, or CD account is an interest-bearing account opened for a specific period of time that earns a fixed income on the amount initially deposited. CDs generally have more competitive interest rates than savings accounts but don't allow you to withdraw funds from the account before the maturity date without incurring a penalty fee or loss of interest. A CD might be the right account for you if you really want to focus on growing your savings and you don't need immediate access to your funds. Leader Bank offers a range of short- and long-term CD accounts that can help you securely grow your savings.