What's the difference between money market account & savings account?

Bank accounts are kind of like filing your taxes--there are plenty of opportunities for savings, but most of them are simply too tedious to actually figure out. But with just a little research, opening a new kind of bank account can earn you money without having to do much at all. Which is why it's such a shame more people don’t know about money market accounts--they’re an incredibly useful financial tool.

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What is a Money Market Account?

So what is a money market account? Simple: Money market accounts are kind of like your checking account and your savings account had a much more useful baby. It’s a hybrid, combining the great attributes of a checking account with the security and interest earned from your savings. They allow you to have access to your money in the way your checking account does, while giving you earned interest. Sounds pretty good, right?

Remember, your savings account differs from your checking account in two simple ways: First off, you have less access to it--these accounts usually aren’t connected to your ATM card. This makes your savings safe but also inaccessible, which can be a pain if you have to transfer money between accounts. Federal law limits your transfer/withdrawal transactions to six per month, making that money both safe and somewhat annoying. The advantage is the second difference, however—you earn money on interest. Unfortunately, it’s not very much.

Explore money market accounts with CIT BankLearn more

How Are Savings Accounts Different?

Putting your money in a savings account basically gives your bank permission to invest in solid, low-risk bonds. This means huge security but low earnings: usually around 1 percent. So if you have $1,000 in savings you’ve earned a total of $10 that year for your worth investment. Yay! You can now buy a sandwich in New York.

Interest accrues over time, so if you put a whole lot in that savings account and let it sit for, say, ten years, and keep adding to your account $100 a month, by year ten you’ll have earned around $730. That’s more like a pair of shoes in New York, so better, but still not great. Most of us have bills to pay, and that kind of incremental earning isn’t excessively useful. In addition your bank might take fees for this service, or charge if you fall below a certain minimum balance.

Best Money Market Accounts 2019

0.01%-1.85% APY
$100 Min balance for APY
Yes FDIC Member

The solution? Swap your savings account for a money market account instead. Interest rates on money market accounts are usually twice as high, so if you put in $1,000 you’ll earn about twenty bucks. And while that may not sound much better here’s the difference: Unlike savings accounts you’re far less restricted in terms of transaction abilities, meaning you can use that money with an ATM card attached. Transactions are still restricted to six outgoing payments, but you still have a card and just need to keep an eye on it. All you have to do is make sure you don’t exceed the transaction limit, and you have free interest accruing on your cash.

So what’s the catch? You might need a higher minimum deposit amount to open it. Some banks charge thousands and others only $100—it just depends. You have to watch out, make sure you don’t spend past this minimum or fees could apply. But other than that, free money—always the best kind.