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News: Money Market Account or Savings Account: Choosing the Best Option -

With the Fed keeping interest rates steadily high, deposit accounts would be a wise choice to store and grow your money. The only difficult choice will be is deciding between a money market account and a savings account.

Both types of accounts are safe and earn interest on the balance. However, their benefits and limitations are different.

A money market account (MMA) is a type of account offered by traditional banks, online banks, and credit unions. These accounts tend to pay higher interest rates and are insured by the FDIC or NCUA, up to $250,000 per account per bank. Banks often set limits to the number of transactions you can make by check, debit card, or electronic transfer. MMAs may require a minimum amount to be deposited.

There are several types of money market accounts: traditional accounts (usually come with a debit card), high-yield accounts (pay substantially higher interest rates and require higher opening deposits), and tiered accounts (your interest earnings will grow with the account balance).

A savings account is an account at a bank or credit union that is also designed to hold your money. However, unlike with MMAs, its interest rates are quite modest. Savings accounts are considered great options for parking cash that you want to have available for short term needs.

There are three types of savings accounts: traditional, high-yield accounts, and certificates of deposit (CDs). The first are standard accounts with rather low interest rates. These are easy to open and maintain. The second are accounts with higher interest rates and, as a result, they may require minimum balances and initial deposits. CDs do not allow you to touch money for a set timeframe. As a result, CDs offer higher interest rates than other savings accounts.

When choosing between the MMAs and savings accounts, a big point of consideration will be the interest rate. However, you should also decide how often you are going to withdraw money from your account. For rare monthly withdrawals, you should choose a money market account. If you want to save money for a specific goal, or have an emergency fund, then a savings account will be a better option.