The Difference Between Money Market and Online Savings Accounts

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?

Money Market Versus Savings

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
FDIC Insured Yes Yes Yes

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.

About the Author

By , on Sep 17, 2009
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (4 Comments)

  1. Roger says:

    Opening an online savings account with Discover Bank is a mistake. I found out the hard way. They are a day or two slow in transferring money out. That hurt a little but one can live with that. There are several other minor things that are troublesome, including horrible customer service. One can live with some of these things, as long as my money is fine. The big issue came when I transferred everything out of the account on the 24th of the month. I was stunned when I didn’t get any interest for the month, 24 days in. They told me that I forfeited that when I transferred everything out. AWFUL.

    I never thought I’d say this but American Express Personal Savings is much better. Money transfers on time, better rates, plus, they do not steal your interest money. I have learned from experience, I hope no one else suffers my fate.

  2. ctreit says:

    Thanks for making the comparison! I have not put any money into money market accounts in a long time, since internet banks have become so much more competitive.

  3. Craig says:

    This is exactly the question I have asked several people for awhile. I currently have 2 money market accounts, one for savings and one for my vacation/emergency fund. The interest rates are basically the same as high yield online banks right now so have no reason to make the switch even though a lot of people praise them. The differences seem few, for me I like how it keeps all my bank accounts with the same bank.

    • Pinyo says:

      @Craig – Thank you. Just make sure that you don’t have more than the FDIC insured amount with any one bank. It’s $250,000 now, but it could go back to $100,000.

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