Bank Money Market Account Vs. Savings Accounts

Bank money market accounts have only a few differences from regular savings accounts. It is important to understand how each type of account works so that you can make an informed decision about which one will best suit your needs.

About Bank Money Market Accounts

A bank money market account is considered to be a long term investment, and not a savings account. In fact, these types of accounts work more like an interest bearing checking account. You will be able to withdraw money or write cashier's checks directly from this account.

Minimum balance requirements are usually much higher than savings accounts, and the interest rate paid is higher as well.

The major difference between the interest on a savings account and the interest on a bank money market account is the fact that a money market account is based on the interest rates of the current market. This interest rate will fluctuate relative to market performance. While this type of account is considered to be a relatively safe investment, it is actually possible to lose money, although this is rare.

About Savings Accounts

Savings accounts yield very small amounts of interest. The rates, however, are usually fixed, regardless of future market performance. The amount of monthly interest that is yielded on your account will be compounded, increasing the amount that you earn each month. Should you withdraw funds from the account, any compounded interest will be lowered for the amount withdrawn. This is why it is much more beneficial not to withdraw from your savings account unless you absolutely need to.

Both Types of accounts

Bank money market accounts and savings accounts are ways that you can use your money to make more money. There is very little risk in losing your funds. Both types of accounts are insured by the FDIC, the Federal Deposit Insurance Corporation, which means that the first $250,000 of your account (per institution) is protected. Should the bank fail, FDIC insured funds will not be lost.

Whether you choose to have a money market account or a savings account, you will be able to access your funds if you need to. Since both types of accounts hold funds that are acquired after taxes, withdrawing will not result in a tax penalty (as with Individual Retirement Accounts). The more money you have available for savings, the more beneficial it will be for you to set it aside in one of these types of accounts. Check the interest rate offerings at your local bank for the best deal.

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