Money Market Account or Money Market Fund? How to Choose

Whether you choose a money market account or money market fund largely depends on the money's purpose.

Couple pictured from above are looking at accounts
(Image credit: Getty Images)

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

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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.


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.


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.

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Lisa Gerstner
Editor, Kiplinger Personal Finance magazine

Lisa has been the editor of Kiplinger Personal Finance since June 2023. Previously, she spent more than a decade reporting and writing for the magazine on a variety of topics, including credit, banking and retirement. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.