What is the difference between money market accounts and savings accounts?

There are quite a few differences between a traditional savings bank account and a money market account. It is true that each have their benefits, but it is possible to understand that the money market account is definitely superior if you have a substantial amount of cash lying around. We shall go over each of the differences between the two options before we come to a conclusion as to which is better.

The providers for a savings bank account are exclusively large banks. Money market accounts are also provided by certain banks as an exclusive investment option. But apart from banks, other financial companies like Vanguard also provide money market investment options.

Savings accounts and money market deposit accounts are insured by the FDIC or the Federal Deposit Isurance Corporation up to a limit of $100000. But money market mutual funds are not insured by the same. However, they are considered to be technically risk free investment options.

Money market accounts require you to invest a minimum amount of at least $10000. But a savings bank account can be opened for as little as $1. Money market accounts are available with check writing privileges and will let you withdraw money a certain number of times per month. That number is usually 6, but can vary according to the terms and conditions. A savings bank account will let you withdraw as many times as you want without incurring any penalties. Again, you can negotiate the terms and conditions to get better withdrawal privileges from the investment company.

Bank accounts offer an interest rate varying from 0.5% to 1.5%. A money market account will offer an interest rate up to 3%. But this does not mean that you will receive 3%, it only means that you might get such an interest rate. However, there is a higher probability that the returns will be better than a savings account.

Savings bank accounts are taxable and so are money market deposit accounts. Certain money market accounts that invest in federal treasury funds are eligible for tax exemption. But do be aware that withdrawing the dividends can attract taxation if the said amount is not immediately reinvested in a tax free investment commodity. When you look at the larger picture, if you have sufficient cash lying around you can easily invest in a fund to acquire better returns when compared to a savings bank account.