Money Market Accounts vs. Savings Accounts

If you’ve been researching personal finance, you might have run across the term "money market accounts," but you might not have figured out the difference between money market accounts vs. savings accounts. There are benefits and drawbacks to each, but they're pretty straightforward.

What is a Money Market Account vs. Savings Account?

When you deposit money in savings account, the bank isn’t allowed to do very much with it. Usually, they get money from you that’s provided with interest payments, then lend that money out at a higher interest rate, keeping the difference as their own income. 

Things are a little different when it comes to a money market account. There are fewer restrictions on what a bank can do with your money, so it will often be invested in certificates of deposit, municipal bonds, treasury notes, and so on.

The Pros and Cons of Money Market Accounts

Like a normal savings account, a money market account will be FDIC insured. In other words, the federal government guarantees your deposits up to $250,000 per depositor, per bank. However, you can usually earn more interest from a money market account, and some accounts allow you to write checks and access your money from ATMs. 

That said, money market accounts aren’t without their drawbacks. You’ll usually need to meet a higher minimum balance than you would with a savings account, and you’re often required to wait several days to make a withdrawal.

When Does a Money Market Account Make Sense?

A money market account somewhat blends the benefits of a savings account and a checking account. The potential ability to write checks and use ATMs provides the liquidity of a checking account and higher interest rates incentivize saving. If you’re going to need easier access than a savings account would allow and have a large amount of money to transfer, a money market account might just make sense.

Visit Your Local Town and Country Bank and Peoples Prosperity Bank

We have branches convenient for residents in Edwardsville, Fairview Heights, Bloomington, and throughout Central Illinois. If you require any further financial advice or assistance, simply contact us online or pay us a visit.