High-Yield Savings vs. Money Market Accounts: Which Should You Choose?

Having savings is a cornerstone of personal finance, as saved cash can help you achieve your money goals as well as spare you from going into debt when you have an unplanned expense. If you're keeping that money in your checking account, however, you should know that you have better options that can keep your hard-earned dough safe -- and earn you some interest in the process. Let's take a closer look at high-yield savings versus money market accounts, and learn how to decide which is best for you.

When would you use this type of bank account?

If you're saving money for a long-term goal, like retirement, it pays to look into a retirement account like an IRA, or even a taxable brokerage account if you're ready to get into investing. But if you're saving for a vacation, a home purchase, or for emergencies, you're going to want an account that comes with less risk. Enter money market and high-yield savings accounts. Both pay interest on your savings, but they are not the same thing.

High-yield savings vs. money market accounts: The basics

Here's a basic overview of the features of high-yield savings accounts and money market accounts.

High-yield savings accounts

A high-yield savings account is a deposit account designed to hold your money for near-term spending. They're user-friendly and you can add as much money as you want to one. Most banks offer a savings account option, but not all of them are high yield.

A high-yield account specifically offers an APY (annual percentage yield) that is more competitive than that of a standard savings account, and thanks to the Federal Reserve's recent interest rate hikes, the rates on these accounts just keep jumping. As of January 2024, the average APY on a savings account is just 0.47%, according to the FDIC -- but you can find high-yield savings accounts paying 10 times that or more.

Look to an online-only bank for the best APY. Savings accounts are not designed for frequent withdrawals, and may be subject to six or fewer "convenient" transactions per month under Regulation D. Some banks suspended this rule due to COVID-19, but it's worth checking if the bank you're considering still enforces it.

Money market accounts

A money market account is another type of deposit account offered by many banks. They're sort of like a hybrid cross between a savings account and a checking account, in that many of them come with a debit card and/or check-writing capabilities. Money market accounts often have similar APY options to high-yield savings accounts, and they may also be subject to limited withdrawals, like savings accounts.

Showdown: HYSAs vs. MMAs

So how do you know which account type is right for you? Let's say you've got an emergency fund saved up and you're looking for a new bank account to keep it in because your old savings account at a brick-and-mortar bank just isn't cutting it anymore, interest-wise. Here's what to consider.

Money access

We always hope that we don't need money due to an emergency, but if life has taught me anything, it's that expensive emergencies are always a possibility. As a result, you want easy access to your emergency fund, whether that's the ability to take money out of an ATM, write a check, or use a linked debit card to pay a bill.

While both types of accounts may limit transactions, money market accounts offer check-writing capabilities and also often a debit card, without needing to take any additional steps to access your money. A high-yield savings account, on the other hand, may or may not come with an ATM or debit card; you may need to link a checking account and then transfer money over to it to be able to withdraw cash or make purchases.

Advantage: Money market account

Minimum balance requirements

One of the nicest things about a high-yield savings account is that many of them have no minimum balance requirement to either open or maintain the account. While you want to keep money in it, and ideally add more money over time, if you need to tap your emergency fund for a bill and end up with a low balance remaining, you won't be facing fees on your savings account.

Money market accounts, on the other hand, may have a minimum balance requirement that you'll need to maintain, or even a starting balance requirement to open the account. So depending on how much your emergency fund is, you may not be able to open the money market account with the highest APY.

Advantage: High-yield savings account

Safety

Whenever you put money into a bank account, you want to know your money is safe and you're not at risk of losing it. The good news is that both high-yield savings accounts and money market accounts fall under the jurisdiction of the FDIC. The Federal Deposit Insurance Corporation is an independent wing of the federal government, and is tasked with insuring deposits in checking, savings, money market, and CD accounts. To double-check whether your bank is part of the FDIC, you can look it up using the BankFind Suite tool.

Any amount of money up to $250,000 kept in these accounts will be reimbursed if your bank fails. And if you have these accounts with a credit union instead of a bank, the NCUA (National Credit Union Administration) has your deposits covered.

Advantage: Tie

Which is right for you?

So which should you choose? Consider the balance you intend to keep in the account and how much access you will need to your money to help you make the decision. It also pays to research APYs offered by both types of accounts, as well as the banks that offer them. It may be easier to open one versus the other if you have existing accounts with a bank you like and the rate it's offering for a new high-yield savings account is worth taking advantage of.

Whichever you choose, both high-yield savings accounts and money market accounts offer you the chance to store your money with no risk and ample opportunities for reward in the form of compound interest.