I was checking out Discover Bank, who is currently offering one of the highest interest rates in my bank rates table. I noticed that Discover Bank offers both an Online Savings and a Money Market options. In the past, I have never paid attention to the difference, but this time I got curious — what is the difference between a money market deposit account and an online savings account?
After reading a few articles, it appears that there are slight differences. The easiest way for me to explain it is to say that money market deposit account is like a hybrid savings and checking account. It pays less interest than an online savings account and requires higher minimum balance. But unlike online savings account, you could write checks directly against the account, or even use a debit card to access your money.
To make it easier to visualize, here’s a table that shows the differences and similarities among a traditional savings account, an online savings account, and a money market deposit account.
|Description||Traditional Savings||Online Savings||Money Market|
|Minimum balance requirement||Minimal, usually no minimum||Minimal, usually no minimum||Moderate, usually in the thousands|
|Access to Money||Bank teller, ATM, and transfer to checking||ATM and transfer to checking account||ATM, debit card, check writing, and transfer to checking account|
|Withdrawal Limit||Up to 6 withdrawals||Up to 6 withdrawals||Up to 6 withdrawals|
|Interest rate||Lowest among savings products||Highest among savings products||Moderate|
In the end, I think it’s better to have a high interest savings account linked with a checking account. This allows you to squeeze a bit more out of your savings. Of course, the savings-checking combo set up requires a little more discipline.