When Should You Use a Money Market Account Instead of a Savings Account?

Regular savings accounts are simple, flexible, and easy to manage. They work well for many savings goals, particularly in the early stages of building an emergency fund or setting money aside for a specific purchase in the near future, such as a vehicle purchase.

Regular savings accounts and specialized accounts, such as Christmas Club and Non-Interest Bearing savings accounts, can play an important role in helping people meet financial goals, but they have a lower annual percentage yield (APY) than other savings options.

Two other account types, share certificates and money market accounts, typically offer higher returns, but each comes with tradeoffs.

The Difference Between a Savings Account and a Money Market Account

Regular savings accounts often have no minimum balance requirement, allowing savers to move money freely. They work well for smaller or frequently used funds. Anytime access and no minimum balance can make these accounts the better choice for some saving goals.

A money market account is designed for larger balances, with higher potential returns once certain balance thresholds are met. Unlike a share certificate, a money market account still allows you to access your money when needed, but with a limited number of withdrawals each month.

Savers can essentially use a money market account just like a regular savings account as long as they don’t need to make more than a few withdrawals each month. The biggest hurdle for many savers is meeting the balance requirements to earn the higher APY.

When a Money Market Account Makes More Sense

When Your Savings Balance Has Grown

Money market accounts often have tiered APYs, with the best rates only being available once the balance reaches a certain level.

If you have the balance to qualify for the higher APYs, leaving that money in a basic savings account can limit how much it earns. Moving those funds into a higher-yield option can make a noticeable difference over time.

When Your Emergency Fund Is Fully Built

A regular savings account is often the best place to build an emergency fund because of its flexibility and ease of access. Once your balance qualifies for a higher APY in a money market account, moving those funds may allow you to earn more.

Some savers hesitate to switch when they see that an account limits the number of penalty-free withdrawals they can have each month. In practice, withdrawal limits are not a major obstacle because savers can transfer their money market savings into a checking or regular savings account for unlimited access.

For savers with larger emergency reserves, a money market account can offer a way to maintain accessibility while improving overall returns.

When a Savings Account Is Still the Better Choice

There are still situations where a regular savings account makes more sense. Some money market accounts can’t be opened without a large starting balance. The APYs on money market accounts that can be opened with a small balance may not be much better than a regular savings account.

In those cases, trading accessibility for a slightly higher yield might not be appealing.

How Money Market Accounts Compare to Share Certificates

Share certificates are designed for funds you know you will not need for a set period. In exchange for that commitment, credit unions offer a fixed rate of return. However, accessing those funds early usually comes with a penalty.

Money market accounts serve a similar purpose for larger balances, but without the same type of restrictions on withdrawals.

The difference comes down to what is being rewarded. Share certificates reward time commitment, while money market accounts reward higher balances.

Choosing the Right Account for Your Savings

OnPath’s Elite Money Market Account offers a higher APY on qualifying balances while still allowing you to access your funds when needed. For larger savings balances, the combination of better returns and flexibility can be more practical than leaving money in a basic savings account.

You can learn more about our savings options and rates on our website.