You have a lot of options when it comes to managing your everyday banking needs. And while you likely know a bit about them, a side-by-side comparison of the most common types of accounts may help you choose which ones are best for you. Checking, savings, and money market accounts have some similarities, but their differences make them suited for different purposes.
It’s important to understand the features and benefits of each type to decide which account — or combination of accounts — works for you.
Checking, savings, and money market accounts are all deposit accounts.
Checking, savings, and money market accounts are all considered deposit accounts. That means you put your money in the bank, the bank holds it for you, and in most cases, pays interest on your balance. In that way, all three types of accounts are similar. However, they differ in accessibility, earning potential, and more.
Here’s a quick side-by-side comparison of the three types of accounts:
Savings accounts are a great place to stash your cash — and earn interest, too.
You already know a jar in your kitchen cupboard isn’t the smartest place to keep your savings. That’s because you’re missing out on the earning potential of that cash. The money in your savings account earns interest, often at higher rates than checking or money market accounts, making it a great place to park your funds for short-term savings goals.
If you need to access your money often, however, a savings account may not be the best choice. While it’s easy to transfer funds to and from a savings account, there are federal limits on the number and types of withdrawals allowed per statement cycle. You can make as many deposits as you wish, but federal law limits certain types of telephone and electronic withdrawals (not including ATM withdrawals, if the account comes with an ATM card) and transfers to six per statement cycle.
Checking accounts are all about easy access.
Checking accounts generally don’t offer high APYs (annual percentage yields), but they’re great for managing funds for everyday purchases and paying bills. Most checking accounts allow you to access your money in a variety of ways. You can write checks and use a debit card, as well as set up online bill pay with most banks. You can also transfer money, make withdrawals from an ATM, and request cashier’s checks and wire transfers.
Money market accounts combine features of both savings and checking accounts.
A money market account is like a checking and savings account hybrid — an account that combines the features of both. That means you can earn a great rate on your balance and still get check-writing and debit card access where offered.
The number of checks you can write and the number of withdrawals allowed per statement cycle are limited, but access is still more flexible than what you get with a savings account. That makes a money market account great for things like an emergency fund or saving for a house.
Your money is safe in all three types of accounts.
A key plus of putting your money in deposit accounts like money market accounts is security. Checking, savings, and money market accounts at FDIC-member banks are insured by the Federal Deposit Insurance Corporation up to the maximum amount allowed by law. That means you won’t lose your money in the unlikely event of a bank failure.
Which type of account is right for you?
Which type of account is right for you depends on your purpose for the account. And there’s no rule saying you can’t open all three. You may want a savings account to help build up a short-term cash reserve, a checking account to handle all the bills, and a money market account for home improvement or travel expenses. It’s easy to link your accounts together, too, to make transfers and keep your savings goals on track.
Online banks offer great rates and great features.
If you haven’t already, you may want to check out the benefits offered by online banks. With an online bank, you can do your business on your own time, from anywhere you have internet access. The best online banks offer a variety of products, including savings, checking, and money market accounts, and great customer service. What’s more, online banks don’t have the overhead that traditional banks do, so they can pass that savings on to you in the form of competitive rates.