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Money Market Accounts vs. Savings Accounts


If you’re looking to save money and earn a bit on it while you do, you’ve probably come across money market and savings accounts. But what’s the difference? And which one is better when it comes to saving money?

Money market accounts and savings accounts are very similar, but there are a few subtle differences you need to know about to find the best savings option for you.

What Is a Savings Account?

A savings account is an account that you can open with your local financial institution. It’s a safe place to put your money where it earns interest or dividends. The amount you can earn is expressed as an annual percentage yield (APY) – the amount of money you can earn in interest/dividends over a year based on our balance. In other words, in exchange for letting the bank or credit union hold your money, you will be paid interest/dividends on the balance of your account, helping your balance grow. Plus, your funds are federally insured, up to a certain amount, but more on that later.

Unlike checking accounts, most savings accounts do not come with checks or debit cards. That’s why a savings account works well, coupled with a checking account, since you can transfer back and forth between them. You can also make withdrawals in person at a local branch. Some financial institutions will also allow you to make ATM withdrawals if you have a debit card linked to a checking account. 

Arkansas Federal’s Share Savings account is a great choice if you’re interested in a savings account. With just a one-time $5 opening deposit, not only are you opening a great basic savings account, but it also secures your membership with Arkansas Federal, giving you access to all the benefits of membership, such as great rates on loans and deposits.

What Is a Money Market Account?

A money market account can also be a useful savings tool. It serves kind of like a mixture of a savings and checking account. While a regular savings account normally doesn’t require a large opening deposit or minimum balance, a money market account typically requires a higher minimum balance, and if your account balance drops below that amount, you may be charged a fee. But in return, you’ll enjoy a higher APY with a money market account than with a regular savings account. 

Also, unlike a regular savings account, you can usually get checks or a debit card with a money market account. Like a savings account, a money market works well with a checking account since it’s fairly easy to transfer and back and forth between them.

It’s important to understand that a money market account isn’t the same thing as a money market mutual fund, which is a type of interest-bearing account where your money is invested into mutual funds that can include stocks, bonds, and short-term debts.

Although low, money market mutual funds carry a risk that you will lose money and are not insured by the FDIC or NCUA. Money market accounts, however, are insured by the NCUA or FDIC, so your money is as safe in a money market account as a regular saving account.

Money market accounts with Arkansas Federal offer tiered dividend rates. As your account balance increases, so will your APY rate. 

Savings Account vs. Money Market Account

Now that we’ve defined what a savings account and money market account are, let’s compare the two a little more closely so that you can decide which account is best for you.

Money Market Account

  • Higher APY
  • Check writing and debit access
  • Larger minimum balance required
  • Federally insured by NCUA/FDIC

Savings Account

  • Lower APY
  • No check writing or debit access
  • Lower minimum balance required
  • Federally insured by NCUA/FDIC

As you can see, savings accounts and money market accounts share many similarities. Both types of accounts earn dividends or interest and are insured by the National Credit Union Administration for up to $250,000. The real difference depends on how much APY you’d like and how much you intend to keep in your account.

Money market accounts usually offer higher  interest rates than regular savings accounts. If you’re able to keep a larger amount of money in the account, you’ll be able to earn more in interest. Opening a money market is most beneficial if you’re planning on keeping money in the account for a longer period of time. 

Because of their differences, money market accounts and savings accounts may be most beneficial at different stages of your financial life. Being aware of these differences can help you find the best saving option to help the growth of your finances. 

Get Started Saving With Arkansas Federal Credit Union

Arkansas Federal Credit Union offers money market accounts, savings accounts, and other saving options with competitive return interest rates. If you’re interested in learning more about opening an account with us, contact us online or visit one of our branches today to get started. 

Membership with Arkansas Federal is required. Federally insured by NCUA.

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