Cash accounts are having a moment, thanks to the decent interest rates they now pay, at long last. But selecting one can be a daunting task given the profusion of choices —from money market accounts to money market mutual funds to a small clutch of newly hatched money market exchange-traded funds.

The term money market has become a catch-all description for a variety of interest-bearing products that follow different rules. The offerings also vary in yield, ease of accessibility and, to a small degree, levels of safety. “In some respects, money market has become more of a marketing term than a technical term,” says Ted Rossman of Bankrate, a website that evaluates bank products. “There's a lot of confusion about this.”

What's an investor to do? We'll lay out the various types of money market investments, all of which invest in high-quality, short-term debt and are appropriate places to stash cash for short- to medium-term goals, as well as what factors to consider before you choose one. We're holding off on including money market ETFs in this discussion, however, because most are less than a year old.

First, an explanation about money market interest rates. They fluctuate, for starters, depending on market conditions and how their holdings perform. And you will see a variety of interest rates quoted. Each one offers an idea of how much your cash can earn over a 12-month period, but they're not exactly the same.

Mutual fund money markets are required to report a seven-day SEC yield, which shows what the fund would pay in interest over a one-year period if rates of the past week stayed the same. It's net of fees, so investors can compare one money market mutual fund to another.

Money market accounts quote an annual percentage yield (APY), and that reflects compound interest — the return you earn on principal plus accumulated interest. That's different from a straight-up interest rate, which you also may see quoted.

They're FDIC insured up to $250,000 if the bank fails. Monthly fees may apply, too, unless you maintain a certain balance.

Quontic Bank's money market account, for example, requires $100 to open. There's no maintenance fee. And the bank pays the same interest — 3.8% currently — whether you have $1 or $150,000 in the account. It comes with check-writing abilities and a free debit card, too. “This is really a pretty standard bank account that's being marketed as a money market,” Bankrate's Rossman says.

Money market accounts. You open these accounts at a bank or credit union. They offer easy access and may yield more than an ordinary savings account. You may have to fork over a certain amount, $100 or even $5,000, to open one. But most allow you to pull some or all of your money at any time. Some accounts even offer check-writing abilities.

Use this Bankrate tool to find and compare savings/money market accounts quickly:

Money market funds. You buy these funds through your broker. There are three types, distinguished largely by what kind of debt they hold.

Government money market funds invest in short-term Treasuries and other government securities. The biggest such fund, Fidelity Government Money Market Fund (SPAXX), yields 3.3%.

By contrast, municipal money market funds invest in state and local government debt, which pay interest that is exempt from federal taxes. American Century Tax-Free Money Market Fund (BNTXX) boasts a 3.1% yield, or a taxable-equivalent yield of 4.1% for investors in the 24% federal income tax bracket.

Some muni money funds focus on debt in a single state, giving residents of those states additional tax benefits. Schwab California Municipal Money Fund (SWKXX) yields 2.4%. For California residents in the 24% federal income-tax bracket, the taxable equivalent yield is 3.7%.

Prime money market funds can hold a mix of government bonds and commercial paper — high-quality, ultra-short-term corporate debt. The largest prime fund by assets, Schwab Prime Advantage Money Investor (SWVXX), holds 20% of its assets in commercial paper. It yields 3.5%.

Generally speaking, all money market mutual funds are safe investment products, but they have some risk. These funds are designed to maintain a stable net asset value of $1 per share, for instance, but during the Global Financial Crisis, a money fund fell below that — it “broke the buck.” Regulators now require that money funds hold a chunk of their portfolio in cash reserves.

Underlying holdings in the money fund can inject some risk, too. Prime funds that hold commercial paper stakes, for instance, are a bit riskier than funds that hold only government securities. That's partly why prime funds offer a tad more yield than government money market funds.

But since the post-GFC cash-reserve rules went into effect, much of the yield advantage in prime funds has been diluted. That's why some advisers, including Brian Schaefer at Johnson Financial Group, have decided prime funds don't offer enough yield these days to justify the risk.

SIPC insurance covers money mutual funds up to $250,000 in cash if a brokerage firm fails; the insurance does not cover investment losses.

Factors to consider

Yield matters, but you may want to consider additional features before choosing a money market product.

Accessibility. Whether you choose a money account or a money mutual fund may boil down to where you plan to hold your cash, whether in a bank — which provides arguably easier accessibility, if you're moving money between household accounts—or at your brokerage firm. Either way, make sure you can withdraw any amount of money, anytime you want. Some may cap monthly withdrawals.

And if you opt to keep your cash at your brokerage firm, don't assume the default cash account earns a decent yield. At Schwab, the default fund for idle cash in brokerage accounts earns just 0.01%. That's fine for money you plan to spend or invest in the next few days or weeks. Otherwise, consider moving it to a money market mutual fund or account to boost your yield.

Tax consequences. The tax treatment on interest earned in money markets can help you narrow your choices. Muni money market funds, for instance, are a good choice for high-income earners holding cash in taxable accounts.

Interest income in other types of money accounts and funds is subject to ordinary federal income tax, though most government fund payouts are exempt from state and local income taxes. The exception is government repurchase agreements, or repos, which generate income that's subject to federal, state and local taxes, says Noreen Brown, an adviser at Summit Financial in New Jersey.

Fees. Whether it's a monthly maintenance fee in a money market account or an annual expense ratio in a money market fund, investors should look at expenses when picking money market products, says Brown. Monthly maintenance fees for money accounts range between $0 and $25. Expense ratios of the 10 biggest money market mutual funds range from 0.11% to just under 1%.

Truth be told, however, depending on how much you're stashing away, expenses may not matter that much. “If you're investing $10,000, who cares?” says Pete Crane, who runs a data firm that tracks money market products. “A million dollars? Yeah, you should care.”

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Money market accounts (MMAs) — not to be confused with money market funds — combine features of savings and checking accounts, allowing holders to write a limited number of checks and get a higher interest rate than traditional savings accounts.

However, enjoying the best of both worlds comes at a price, and sometimes a hefty one.

This is why it's important to consider the fees in advance to ensure this is the right option to maximize your savings.

Why money market accounts seem appealing

It’s easy to see why so many people opt for money market accounts. Being able to write a check from what’s essentially a savings account seems like freedom. Although it’s less common, some money market accounts even come with a debit card, usually with limits on transactions.

MMAs are also attractive because they sometimes offer higher interest rates than traditional savings accounts. Our top picks for the best money market accounts earn up to 4.35%.

Explore some of the top MMA accounts, using the tool below, powerd by Bankrate:

However, the returns are not as high as those offered on other investment options. Importantly, you might have to keep a certain balance to earn the high interest rate that first attracted you.

Most money market accounts utilize a tiered system tied to balance amounts. For example, you might earn the lowest possible rate on balances up to $9,999 and the highest possible rate on balances over $25,000.

Currently, the average interest rate on money market accounts is 0.59% APY, as of August. High-yield MMAs from online banks can offer interest rates over 4%.

Another bonus with MMAs is that the money should be protected against institutional failure by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration for credit unions.

Protection is up to $250,000 per account ownership type and per depositor, but it’s not a bad idea to check that the financial institution has coverage.

The most common (and costly) fees

Despite the appealing nature of money market accounts, fees can quickly eat into your savings if you don’t pay attention. Some fees can be waived or avoided in certain situations, depending on the financial institution’s rules.

Here are some of the most common money market account fees:

• Monthly fees: Many MMAs come with maintenance fees charged every month, typically from $10 to $25. If you maintain a certain minimum balance or set up qualifying direct deposits, some institutions might waive this fee.
• Fees for excess withdrawals: Many institutions set limits on the number of withdrawals you can make from your MMA in a month. If you go over, you might be charged a fee. Typically, ATM withdrawals aren’t included in limits, but every other type is, including transactions made with a debit card. The maximum number of withdrawals from an MMA is around six per month.
• Minimum balance fees: Keep an eye on your balance because some institutions charge a fee if it falls below a certain amount. This can be as little as $1,000 or much higher, depending on the institution.
• ATM fees: If your MMA comes with a debit card, be wary of using it to withdraw from an ATM. Some institutions charge a fee even when withdrawing from their ATM. If that’s not the case, you can be sure there’ll be a fee when withdrawing from an ATM outside their network.
• Overdraft fees: Like many other bank accounts, MMAs typically charge a fee if you overdraw the account. These fees can range from $30 to $35 per transaction.
• Fees for closing the account too early: Be sure you want the account, and pay attention to the minimum holding period. Some institutions charge a fee if you close your MMA too soon after opening it.

Real-world examples: How money market account fees eat into returns

One of the simplest ways to see how MMA fees can eat into your returns is to check the fees you’re charged in a given year against the interest earned.

For example, if you have a money market account that charges a $10 maintenance fee every month, the $120 in maintenance fees over a year would potentially negate much of the interest earned, especially if you didn’t add anything to your balance.

Now consider your possible earnings: 4.35% interest annually on a $5,000 balance, for example, would earn you $217. So, in this instance, you would save less than $100 a year, given the fees.

Another way fees eat into your savings is through compounding. Every time a fee is deducted from your balance, it means that a lower balance earns less interest in future months, resulting in diminished compounding.

Alternatives: High-yield savings or no-fee MMAs

With so many potential fees eating away at your savings, money market accounts might not be the best option for everyone. However, not every MMA charges fees, so it pays to shop around. Here are some examples of no-fee MMAs:

• Sallie Mae Online Money Market Account
• Synchrony Bank Money Market Account
• Ally Money Market Account
• Discover Money Market Account

While the above options don’t charge monthly maintenance fees and have a $0 minimum opening balance and deposit, they may have other fees attached to them that can easily be avoided.

For example, if you avoid overdrawing the account, you won’t have to worry about overdraft fees, whether or not the institution charges them.

Alternatively, if you don’t care about being able to write checks from the account, you might opt for a high-yield savings account instead. Many high-yield savings accounts offer rates over 4%, making them an attractive alternative to an MMA.

Tips to protect your savings

The most important thing to remember when shopping around for money market accounts is to carefully review the list of applicable fees. Those monthly maintenance fees can be especially hard to avoid — and they can be the biggest culprits when it comes to eating away at your savings.

It’s also important to verify that they have insurance with the FDIC or NCUA. If they do, keep your balance within the insurance limit and track your minimum balance versus any minimum required by the financial institution. Finally, stick to any withdrawal limits placed on the account and monitor interest rates for better deals.

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Since the Federal Reserve started cutting short-term interest rates last September, yields on bank accounts have been falling.

Savers who have significant sums to stash away may be able to earn a little extra interest by putting their money in “jumbo” certificates of deposit or money market deposit accounts, which have larger minimum balance requirements than standard accounts but offer higher yields.

The minimum amount required to open a jumbo account varies, but usually, you’ll need to deposit at least $25,000.

My eBanc, for example, offers an online six-month jumbo CD that recently yielded 4.5% if you have a balance of at least $50,000; otherwise, the bank’s six-month CD yields 4.35%, with a $5,000 minimum deposit.

And if you deposit at least $100,000 in My eBanc’s money market account, you get a 3.9% yield. Balances of less than $100,000 earn 3.4% (if your balance falls below $5,000, you’ll be charged a $15 monthly fee).

Justice Federal Credit Union offers a 4.21% yield on a 12-month CD if you deposit at least $100,000. (This jumbo CD is not in the table below because we assume a smaller deposit when listing those accounts.)

Otherwise, its 12-month CD yields 4.10%. Anyone can become a member of Justice FCU by joining a qualifying association.

The Federal Deposit Insurance Corporation and the National Credit Union Share Insurance Fund provide up to $250,000 in insurance per depositor against the failure of a bank or credit union.

If your combined balances in deposit accounts would exceed the limit at a single institution, you may want to spread your funds among multiple banks or credit unions.

To help make the most of your savings, we’ve compiled a list of top-yielding accounts that offer competitive interest rates.

Whether you're considering a high-yield savings account, a money market account or a jumbo CD, this table provides key details, including minimum deposit requirements, current interest rates and any notable terms or conditions.

• * Fund is waiving all or a portion of its expenses
• ? Internet only
• # Money market deposit account
• & Must be a member; to become a member, see website or call
• ‡ CD term is 36-59 months

Sources: Bankrate, DepositAccounts, Money Fund Report (iMoneyNet).

• * To earn the maximum rate, you must meet requirements such as using your debit card several times monthly and receiving electronic statements
• ^ Portion of the balance higher than the listed range earns a lower rate or no interest
• & Must be a member; to become a member, see website.

Source: DepositAccounts.

As of April 30, 2025. EE savings bonds purchased after May 1, 2005, have a fixed rate of interest. Bonds purchased before May 1, 1995, earn a minimum of 4% or a market- based rate from date of purchase. Bonds bought between May 1, 1995, and May 1, 2005, earn a market-based rate from date of purchase.

Source for Treasuries: U.S. Treasury

What if a jumbo account isn’t the right fit?

If a jumbo account doesn’t align with your financial needs, there are still plenty of ways to earn competitive interest on your savings.

High-yield savings accounts, standard certificates of deposit and money market accounts offer great alternatives with lower minimum deposit requirements.

Explore some of today’s best savings accounts with the tool below, in partnership with Bankrate, to compare current interest rates:

Are jumbo accounts the right choice for your savings?

Jumbo accounts can be a smart option for big savers who want to earn higher interest rates. Whether you choose a jumbo CD or a money market account, these accounts typically offer better yields than standard savings options.

However, they also come with higher minimum deposit requirements and, in some cases, fees if your balance drops below a certain threshold.

Before committing, compare rates, terms and insurance protections to ensure a jumbo account aligns with your financial goals and provides the best return on your savings.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Money market accounts are variable-rate savings products. Most yields today are somewhere between 4% and 5.3%. That sounds like a nice return, but — there always is a but — there are two things to keep in mind: taxes and the prevailing inflation rate.

Two problems with money market yields

If the money market is held in a taxable account, the interest earned is taxed as ordinary income. For an investor with a money market account paying 5.3% and paying a combined 30% federal and state income tax rate, he or she will have an after-tax yield of 3.71%. However, that is before inflation. The U.S. inflation rate — measured by the CPI — as of the end of June was 2.97%. If we subtract the inflation rate from the after-tax yield, we get a real after-tax yield of 0.44%. In other words, a 5.3% yield looks enticing, but after taxes and inflation, we’re not really accomplishing much.

The other problem is today’s current income tax rates are set to expire at the end of 2025. What tax rates will be in 2026 is hard to forecast, but several provisions are set to expire. The Tax Foundation notes, “Without congressional approval, most taxpayers will see a notable tax increase.” That may mean more taxes owed on money market interest.

A further problem with money markets is today’s “hot” rates may not be around for that much longer. We haven’t seen rates this high since 2006- 2007. Even then, higher rates didn’t last that long. After 2008 rates stayed low for the next 14 years. How long will rates stay high is up for debate. A recent Financial-Times Chicago Booth poll has the Fed making one quarter-point interest rate cut this year. CNBC recently reported the “dot plot” of rate cuts indicates four reductions in 2025 totaling 1 percentage point. Still, it is anyone’s guess, and forecasts will be adjusted as the data comes out. The point is don’t get too comfortable with today’s rates, because we might have reached peak money market yields.

One solution

All this points to the two major concerns with money markets right now — taxes and variable rates. Of course, investors can buy long-term certificates of deposit to lock in the yield for longer, but the interest is still taxable. Municipal bonds can pay tax-free interest, but there is principal risk. A better approach may be a fixed deferred annuity.

A fixed deferred annuity is an insurance product that guarantees an interest rate for a set number of years. An example may be a fixed deferred annuity with a guaranteed rate of 4.9% for five years. The investor can lock in today’s rates for longer.

The other advantage of a fixed deferred annuity is the interest is tax-deferred. The interest accrues and no taxes are paid until withdrawn. This is unlike a CD or money market where both are fully taxable if held in taxable accounts.

What to know

One of the biggest downsides with a fixed annuity is the illiquidity. Generally speaking, fixed annuities come with surrender penalties. A surrender penalty is assessed when you withdraw money early — within the first five years if you purchased a five-year contract. Surrender penalties vary and can range from 7% of the pre-mature withdrawal in the first year to 3%-5% in year five and zero after year five. For this reason, you want to make sure you won’t need the money for the time period. Most carriers offer a 10% free annual withdrawal, which allows you to withdraw 10% of the contract each year without surrender penalties. 

For qualified annuities (those purchased with pretax funds, such as 401(k)s and IRAs), withdrawals are taxed as ordinary income. For non-qualified annuities (purchased with after-tax funds), the earnings portion of your withdrawal is taxed as ordinary income. In both cases, there are also IRS penalties if you withdraw from an annuity prior to age 59½.

Money in a fixed deferred annuity is not FDIC insured, but backed by the insurance carrier, so picking a good quality insurance company is important.

Most fixed annuities have costs designed into the contract. These costs are not netted from the guaranteed rate, but rather built into the contract, so 100% of the money you put into a fixed annuity goes to work from day one. Beyond the surrender penalties, there may be other administrative fees or charges for optional benefits. It’s best to consult with a qualified professional before making any purchase, and shopping around can help ensure a competitive rate.

Final thoughts: Building a diversified fixed-income portfolio

Don’t get me wrong, I still believe in municipal bonds, Treasury bonds and other fixed income investments, and I use them with my clients, but I wouldn’t bank on money markets being the sole source of return. If you peel back the onion, the after-tax and after-inflation yields may not be that attractive. Fixed annuities at least have the ability to defer taxes and lock in today’s rates for longer, unlike money markets whose rates are not guaranteed and can be fully income taxable. CDs may pay similar rates to fixed annuities, but the interest on CDs is taxable each year.

All in all, deferred fixed annuities can be worth considering as part of a diversified fixed-income allocation for tax-conscious investors wanting to lock in today’s interest rates for longer.

For questions or more information, please email the author at maloi@sfr1.com.

Michael Aloi, CFP, is an independent financial advisor with 25 years of experience in helping clients achieve their financial goals. He works with clients throughout the United States. For more information, please visit www.michaelaloi.com.

Investment advisory and financial planning services are offered through Summit Financial LLC, an SEC Registered Investment Adviser, 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666.

This material is for your information and guidance and is not intended as legal or tax advice. Clients should make all decisions regarding the tax and legal implications of their investments and plans after consulting with their independent tax or legal advisers. Individual investor portfolios must be constructed based on the individual’s financial resources, investment goals, risk tolerance, investment time horizon, tax situation and other relevant factors. Past performance is not a guarantee of future results.

The views and opinions expressed in this article are solely those of the author and should not be attributed to Summit Financial LLC. Links to third-party websites are provided for your convenience and informational purposes only. Summit is not responsible for the information contained on third-party websites. The Summit financial planning design team admitted attorneys and/or CPAs, who act exclusively in a non-representative capacity with respect to Summit’s clients. Neither they nor Summit provide tax or legal advice to clients. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state or local taxes.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

You want to earn higher yields on your spare cash but you’re unsure of which account to store it in. Learn whether a CD or money market is a better fit for you. 

In a high-interest rate environment, it pays to save your money. There are several savings vehicles to choose from, but CDs and money market accounts typically pay higher interest rates or Annual Percentage Yield (APY) for storing your extra cash. The two account types bear a few similarities, but which one is better for boosting your savings? 

You can check out our tools, in partnership with Bankrate, to see the most up-to-date CD and savings rates available.

Certificates of Deposit (CDs) 

CDs or Certificates of Deposit are a type of savings account that allows you to lock in higher APYs for a set time of anywhere from three months to ten years. The money stored in a CD is locked away until the end of the term. Think of it as promising the bank they can hold your cash for a certain length of time. If you withdraw your money before the time you promised, you’ll face penalty fees. 

 Money Market Accounts (MMAs) 

Most financial institutions offer money market accounts as a higher-yield alternative to traditional savings accounts. This savings option has higher minimum balances, higher maintenance fees, and a higher APY compared to a standard savings account. These are still FDIC- and NCUA-insured accounts, so it’s not the same as a money market fund.

Pros and cons

Here are a number of differences to consider when thinking about where you want to put your money.

Money market accounts take the cake over CDs for accessibility. While some banks still limit withdrawals to six per month (despite the indefinite suspension of Regulation D), you’ll still have easy access to your money with an MMA. Money markets typically have ATM cards and check-writing privileges at certain banks. If you need to withdraw for emergencies or unplanned expenses, it’s not much of an issue. 

In comparison, CDs charge a penalty for early withdrawals. In some cases, this equates to a portion of your interest. For example, a 12-month CD from both Goldman Sachs and Bask Bank charges 180 days' worth of interest for early withdrawals. This means you could lose money on your investment if you need to withdraw in an emergency. 

If you’ve ever heard mature investors reminisce about CD interest in the 80s, you’ve probably considered using one. Back in 1984, a five-year CD had an average interest rate of 11.74% APY and a one-year CD wasn’t far behind at 11.17% APY, according to Bankrate. These days, CD rates are far more modest with five-year and one-year CDs averaging a little over one percent with highs of 5.60% for 12 months. 

That’s still significantly higher than average Money Market rates. As of September 21st, 2023, USA Today reported an average APY of 0.54% for MMAs with a balance of $10,000.  

With both of these account types offering FDIC- and NCUA-backing for deposits, they’re both considered safe if your bank or credit union becomes insolvent. FDIC insurance covers your bank deposits for up to $250,000 per depositor. 

Money markets have higher balance requirements than a typical savings account. Most start at a balance minimum of $1,000 but it varies by bank. If you don’t meet the balance requirements, there’s also a higher maintenance fee associated with the account. CDs usually have similar balance requirements with minimums of $1,000, but there typically aren’t monthly maintenance fees. 

Bottom Line

Despite similarities, CDs and Money Market accounts are both suited for different purposes. CDs are best for savers who may struggle with discipline since these accounts penalize you for withdrawing. It’s also for those who want to gain higher yields on their money they don’t plan to touch by locking in rates ahead of forecasted interest rate declines. MMAs are better suited for savers who plan to stash money for emergencies and want to earn slightly more than the average savings account. Ultimately, the account you choose depends on your personal goals and the plans you have for your savings. 

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With inflation rising, one smart way to shield against its impact is with the right savings account. The question is, which one do you choose?

Two of the smarter options are CDs and money market accounts. Each of these solutions offers generous returns, but they're tailored for specific savings purchases.

Money market accounts are akin to a hybrid checking account in that you can make regular purchases using a debit card. Meanwhile, a CD is a smart way to store your cash and let it grow until its maturity date. I'll break down how each one works so you can decide the best fit for you.

What are certificates of deposit (CDs)?

A certificate of deposit (CD) is a type of savings account that holds a set amount of money for a fixed time period. Term lengths can be six months to five years. The rates on CD accounts are much higher than those found on traditional savings accounts, with many now offering an APY of around 4%.

Savings rates on CD accounts are locked in once you open the account, which is why many experts are suggesting that you take advantage of savings rates while they’re still high. However, when you put your cash in a CD account, you won’t be able to access this money until the account matures, or you’ll risk incurring a fee that can offset any interest earned.

When to open a CD: If you’re saving for a particular goal, like a future purchase, putting your cash in a CD can help. For example, if you plan on purchasing a vehicle in three years, opening a three-year CD can help you maximize your savings until you’re ready to make that purchase, while also helping you resist the temptation to spend that cash.

Before signing up for a CD, here are some things to consider:

• If you need to withdraw cash, it will close the CD and charge you a fee
• CDs won't earn you as much as investments historically can
• For long-term CDs, inflation might negate some of your earnings

What are money market accounts?

A money market account (MMA) is an interest-bearing account at a bank or credit union. MMAs differ from traditional savings accounts as they allow check-writing privileges and sometimes come with a debit card that can be used to access money at an ATM. Plus, they usually have much higher interest rates than traditional savings accounts.

Basically, they can be thought of as a blend of traditional checking and savings accounts. Like high-yield savings accounts, rates on money market accounts are variable, fluctuating with market conditions.

When to open a money market account: Money market accounts are good options for individuals who need to keep their savings easily accessible. Therefore, they're good choices when saving for a short-term goal or putting cash away in an emergency fund. However, make sure you'll be able to meet any minimum balance requirements so you're not stuck with any fees.

These accounts offer high savings rates, but make it easy for you to withdraw cash if needed — at no additional fee. Check-writing privileges and ATM access also make withdrawing funds more convenient than other savings accounts that require you to transfer the money into a checking account first.

Consider these things before opening an MMA:

• Many accounts come with minimum balance requirements
• They have variable interest rates, so if the Federal Reserve cuts rates in the future, it could impact your earnings
• Some banks offer these accounts with transaction limits; pay close attention to the terms before opening

Which savings account works best for you?

Money market accounts and CDs vary in a few key ways. Mainly, money market accounts offer a level of liquidity that CDs don’t. In an MMA, your money is accessible, while in a CD, your cash isn’t accessible until the term account matures.

Another way these accounts differ is that the savings rates on MMAs are variable, meaning they can go up or down depending on the market, which is beneficial if rates go up, but means less earnings if rates go down. On the other hand, since CDs offer a fixed rate, if rates go down, your earnings won’t be affected.

Therefore, take a look at your priorities and cash flow to determine the best fit for your needs.

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Saving money is an important component of a strong financial plan. Putting money away makes it easier to prepare for emergency expenses and achieve short-term financial goals, but how do you know where to save cash?  

Before you get started, determine if you'll need the funds you plan to save: Avoid investing money you'll need to access in the event of an emergency or that you plan to use in the next year or two. For cash you are able to put aside, you want to ensure you keep it in the best place. Here are some of the best options to consider as you decide where to save your money.

Savings account

Savings accounts are among the most basic deposit accounts with a bank or credit union. Consider establishing your savings and checking accounts at the same institution for easy money transfers between the two. You can access both accounts through the same card at the ATM. 

You can also add a savings account to an existing debit card that comes with another direct deposit account. If you need cash, you can access your funds through a transfer to your linked checking account or with an ATM card. 

Savings accounts typically offer interest on your deposits, but if you go with a traditional bank, you might not earn much. High-yield savings accounts, on the other hand, may offer interest upward of 10 times the average rate. These rates are typically reserved for savings accounts with online banks as well as at some credit unions and traditional banks.

Savings accounts generally don't charge monthly maintenance fees, but some may unless you maintain a minimum balance set by the financial institution.

Keep in mind, too, that savings accounts typically only allow you to withdraw funds six times per month. If you exceed that threshold, you may be charged an excessive withdrawal fee. 

Money market account

A money market account acts as a hybrid between a checking and savings account. Like a checking account, you can access your money with a debit card, paper checks, an ATM card and bank transfers. And like a savings account, you'll typically earn interest on your deposits. In some cases, money market interest rates can be better than what you'd find in a high-yield savings account. 

This option may be better than a traditional savings account if you want easier access to your money in case of an emergency, but money market accounts are more likely to charge a monthly service fee if you can't meet balance requirements. They also often require higher minimum deposits. In some cases, you might not earn interest at all unless you have enough money in the account.

Certificate of deposit

If you have some money you don't need access to for several months or even years, a certificate of deposit (CD) could be a good fit. A CD is a type of savings account offered by banks and credit unions. You generally agree to keep your money in the CD without taking a withdrawal for a specified length of time. 

"It makes sense to put cash in a CD over a savings or money market account when one wants to commit to leaving the money in the account for a longer period of time and earning a higher return," says Michael Collins, founder and CEO of Wincap Financial and adjunct professor at Endicott College.

In exchange for higher interest rates on CDs, you'll need to lock up your funds for the account's term. For example, if you choose an 18-month term and try to withdraw money before the account matures, you'll be slapped with an early withdrawal penalty.

Unlike savings and money market accounts, CD rates are fixed once you open your account, so your rate won't change for the duration of your CD term. (CDs also typically come with a fixed savings interest rate, which is money you earn from the bank in exchange for leaving your money in the account.) There are no monthly maintenance fees for a CD, but you may need to meet a minimum deposit requirement to open an account.

Deciding where to save your money

Think about your financial goals and needs when it comes to where you want to save your cash. Research and compare several savings, money market and CD accounts to determine which one would be the best fit for you. 

Whatever you do, avoid taking on too much risk with your short-term cash needs. "Investment accounts typically involve the risk of loss of principal and entail certain lock-up periods, both of which can be problematic if the money is needed in a hurry," says Collins. "It's best to stick to low-risk savings vehicles for emergency funds."

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The Federal Reserve didn't cut interest rates at its latest meeting, thanks in part to a weakening job market. As such, it gives savers more time to capitalize on higher rates.

When looking for savings options, two options include a high-yield savings account and a money market account. High-yield savings accounts have been somewhat resilient during the Fed's rate-cutting spree last year. Meanwhile, money market accounts give you the higher rates of a savings account, with the flexibility of a checking.

Torn on which one to choose? We'll compare both options based on accessibility, risk, returns and more to help you choose the best fit for your needs.

Which savings account is easiest to access cash?

Most money market accounts make accessing your funds easier than high-yield savings accounts.

This is because money market accounts usually offer check-writing privileges, and in some cases, even allow you to pay directly from your account with a debit card or easily pull cash from an ATM.

Check out some of the best money market accounts:

On the other hand, to spend the money in a high-yield savings account, you’ll often have to connect the account to an existing checking account and then transfer funds from one account to the other, making it a bit more difficult to access your cash.

For this reason, if an emergency arises and you need quick access to your savings, a money market account has an advantage over a high-yield savings account.

Which option is less risky?

Both money market accounts and high-yield savings accounts are solid choices if you're looking for a risk-free way to maximize your savings. This is because both high-yield savings accounts and money market accounts offered by banks or credit unions are FDIC or NCUA-insured.

This means that if your bank fails and goes under, you won’t have to worry about losing your hard-earned cash. FDIC insurance protects up to $250,000 in individual deposit accounts and up to $250,000 for each person’s share of joint accounts.

NCUA insurance is similar, covering accounts held at credit unions. NCUA insurance covers up to $250,000 per credit union member. These protections cover accounts at both brick-and-mortar banks and online banks.

Which has a higher APY?

Both money market accounts and high-yield savings accounts possess much higher savings rates than traditional savings accounts, with some even offering 4.20% APY.

However, high-yield savings accounts sometimes beat out money market accounts when it comes to APY, so it’s important to compare rates before opting for one account over the other.

Opening a savings account with a high APY, whether it's a high-yield savings account or a money market account, is a no-brainer. You'll earn interest on your cash (free money!) with little effort on your part.

See our list of top money market accounts and best high-yield savings accounts to compare current rates today. You can also compare current rates among high-yield savings accounts by using the tool below.

What are the minimum balance and deposit requirements?

Many high-yield savings accounts have very low balance and deposit requirements, making them accessible to all people, even those with low savings balances.

You can see balance requirements and current rates for some of the best options below:

On the other hand, when compared to high-yield savings accounts, money market accounts often have higher minimum balance requirements. With a high minimum balance requirement, it's easier to fall below your account minimum, making you more likely to incur fees.

However, there are exceptions; you can find money market accounts with no or low balance requirements.

Bottom line on money market account vs high-yield savings account

Overall, both money market accounts and high-yield savings accounts have their pros and cons. So, when should you choose a money market account over a high-yield savings account?

Typically, money market accounts are better suited to people with larger amounts of money they’re looking to save, as they’ll be able to meet any minimum balance requirements and therefore avoid fees.

On the other hand, individuals who are just beginning to save and don’t have large amounts of cash should opt for a high-yield savings account (or a money market account with a low minimum balance requirement).

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If you're looking to choose a money market account, here are some factors to consider. A money market account (MMA) is an interest-bearing account at a bank or credit union, and it usually offers higher interest rates than traditional savings accounts. The way money market accounts differ from traditional savings accounts is that they sometimes allow check-writing privileges and come with a debit card that can be used to access money at an ATM. Because they offer a higher level of liquidity you won't find in other savings accounts, like CDs, they’re a good option for short-term savings goals or savings you’ll need to access regularly.

Money market accounts vs. savings accounts

How are money market accounts different from traditional savings accounts? Money market accounts can be good alternatives to traditional savings accounts, as they typically offer a higher APY on balances, although they may not offer as high of yields as some of the high-yield savings accounts on the market. 

How are money market accounts different from CDs?
Money market accounts and CDs vary in a few ways. The main one is that in an MMA, your cash is accessible. Cash in a CD, on the other hand, can't be accessed until the term is over, or you’ll risk incurring a hefty fee. Another way money market accounts and CDs differ is that CDs offer a fixed rate that can be locked in — which is ideal when rates are high. Yields on money market accounts are typically variable. 

Choosing a money market account

Here’s what to consider when deciding to open a money market account. 

Decide what your savings goals are: What do you plan on using the funds for and when? Money market accounts are good options for those looking to save cash where it will earn interest while still being accessible, such as setting up an emergency fund.

Shop around: You’ll then want to compare banks and credit unions to find one best suited for your needs. Taking into consideration the APY on an account, as well as if it has check-writing or ATM access. Some accounts also have minimum deposit requirements and monthly fees you should also consider. 

Make sure your money is safe: When choosing a bank or credit union, you’ll want to make sure it is FDIC or NCUA insured. 

Open the account: You’ll then need to open the account and be prepared to put down an initial deposit, if necessary. 

Read more

• Savings vs. checking accounts
• The top money market Accounts
• Money Market Account or Money Market Fund? How to Choose.

Two kinds of money market vehicles are money market mutual funds and money market accounts. If you're looking for a place to park your cash, the difference is often a point of confusion. 

What are Money Market Accounts?

Banks and credit unions offer the deposit-account version, usually called a money market account or MMDA. These accounts come without market risk and are protected by the Federal Deposit Insurance Corp. (FDIC) see FDIC, NCUA and SPIC insurance: Coverage amounts and how it works. 

What are Money Market Funds?

The mutual fund version — often called a money market fund, or just money fund —holds such short-term investments as Treasury bills and other government securities, commercial paper, and certificates of deposit (CDs). Money market funds are low-risk — but they don’t match the safety of money market accounts, and they are not FDIC-insured.

Yields

When interest rates are low — as they were for years — money-fund yields fall more quickly than those of money market accounts. “Yields on bank deposits tend to lag the Fed, and that’s a benefit when rates are going down,” says Peter Crane, president of Crane Data, which tracks money market funds. 

But, in a different economy, where the Fed has raised interest rates meeting after meeting, funds are competitive again. As the Crane ranking data shows, you could currently get as much as 4.71% on a taxable money fund, 2.44% on a tax-free fund and as much as 4.44% on a money market account.

Purpose

The decision of whether to use a money market fund or account largely boils down to the money’s purpose. For emergency savings or other cash that needs to be safe and readily accessible from your bank, a money market account makes sense.

Money that you may want to quickly move into the market — say, to scoop up stocks at low prices during a dip — is often best parked in a money market fund linked to the rest of your investment portfolio.

Read More

• Top Money Market Accounts
• Vanguard Money Market Funds: What You Need to Know
• What Is a High-Yield Savings Account?