Let's break each feature down.
Interest rates
Money market accounts typically offer higher interest rates than regular savings accounts, but their rates can be variable, fluctuating with market conditions. MMAs may also require higher minimum balances to earn the top-tier interest rates, which can limit access for some savers.
High-yield-savings accounts, on the other hand, consistently offer competitive rates above those of standard savings accounts, regardless of the balance size. While these rates can also vary, HYSAs tend to provide more consistent returns, often without the need for a high minimum balance.
Account access
We always hope that we don't need money due to an emergency, but if life has taught me anything, it's that expensive emergencies are always a possibility. As a result, you need easy access to your emergency fund, whether that's the ability to take money out of an ATM, write a check, or use a linked debit card to pay a bill.
While both types of accounts may limit the number of transactions you can make, money market accounts offer check-writing privileges and often come with a debit card. This means you don't need to take any additional steps to access your money.
A high-yield savings account, on the other hand, may or may not come with an ATM or debit card; you may need to link a checking account and then transfer money over to it to be able to withdraw cash or make purchases. If that checking account is with a different bank, it could take a few days to get your money.
Minimum balance requirements
One of the nicest features of high-yield savings accounts is that many of them have no minimum balance requirement to either open or maintain the account. While you want to keep money in it, and ideally add more money over time, if you need to tap your emergency fund for a bill and end up with a low balance remaining, you won't be charged fees on your savings account.
Money market accounts, on the other hand, may have a minimum balance requirement that you'll need to maintain, or even a substantial starting balance requirement to open the account. So depending on how large your emergency fund is, you may not be able to open the money market account with the highest APY.
FDIC/NCUA insurance
Whenever you put money into a bank account of any type, you want to know your money is safe and you're not at risk of losing it. The good news is that both high-yield savings accounts and money market accounts fall under the jurisdiction of the FDIC.
The Federal Deposit Insurance Corporation is an independent wing of the federal government, and is tasked with insuring deposits in checking, savings, money market, and CD accounts. To double-check whether your bank is part of the FDIC, you can look it up using the BankFind Suite tool.
Any amount of money up to $250,000 per account holder (this means that joint accounts get up to $500,000 in protection) kept in these accounts will be returned to you if your bank fails. And if you have these accounts with a credit union instead of a bank, the NCUA (National Credit Union Administration) has your deposits covered.
Liquidity
Money market accounts offer greater liquidity by allowing check-writing privileges and debit card access, making it easier to withdraw funds or make payments directly from the account. This flexibility makes MMAs more appealing for individuals who may need frequent or immediate access to their savings.
HYSAs, on the other hand, generally have more restricted access, limiting withdrawals and transfers to online or mobile platforms. While still offering reasonable liquidity, HYSAs are better suited for those who plan to leave their money untouched to maximize interest earnings.
Fees
MMAs often come with higher fees, especially if the account balance falls below a certain threshold. These fees can include monthly maintenance fees, and in some cases, transaction fees for exceeding a limited number of withdrawals.
HYSAs tend to have fewer fees, particularly when offered by online banks. Many HYSAs have no monthly maintenance fees and lower balance requirements, making them a more cost-effective option for savers who want to minimize costs.
What to consider when choosing between a money market account and a high-yield savings account
The key differences between money market accounts and high-yield savings accounts are their access to money and minimum balance requirements.
So which should you choose? Take these steps to decide:
- Consider the balance you intend to keep in the account and how much access you will need to your money to help you make the decision.
- Research APYs offered by both types of accounts, as well as the banks that offer them.
- Note that it may be easier to open one versus the other if you have existing accounts with a bank you like and the rate it's offering for a new high-yield savings account is worth taking advantage of.
Which is right for you?
High-yield savings accounts are best for those who want to earn more interest with fewer withdrawals.
Money market accounts are best for those who need more flexible access to their savings.
Whichever you choose, both HYSAs and MMAs offer you the chance to store your money with no risk. Plus, you get ample opportunities for reward in the form of compound interest.
