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The Difference Between Money Market and Online Savings Accounts

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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.

DescriptionTraditional SavingsOnline SavingsMoney Market
Minimum balance requirementMinimal, usually no minimumMinimal, usually no minimumModerate, usually in the thousands
Access to MoneyBank teller, ATM, and transfer to checkingATM and transfer to checking accountATM, debit card, check writing, and transfer to checking account
Withdrawal LimitUp to 6 withdrawalsUp to 6 withdrawalsUp to 6 withdrawals
Interest rateLowest among savings productsHighest among savings productsModerate
FDIC InsuredYesYesYes

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.

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Craig
10 years ago

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.

ctreit
ctreit
10 years ago

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.

Roger
Roger
7 years ago

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… Read more »

The Difference Between Money Market and Online Savings Accounts

by Pinyo Bhulipongsanon time to read: 1 min
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