The Differences Between a Checking, Savings, and Money Market Account

October 23, 2020

When deciding where you will keep your money there are a number of options. You could opt for the typical savings account that offers you a safe place to keep your money that offers an interest rate. You could consider a checking account which enables you to make payments with check in addition to swiping a card and using cash. Another common option is a money market account. In this article, we will discuss the difference between these three options.

 

Savings Accounts Explained

A savings account is an account held at a bank that offers interest that helps to grow your savings. This is a feature of most banks. It is important to note that the interest rate that you will receive varies from bank to bank. It is often possible to increase your interest rate by having a checking account at the same bank you have your savings account. 

It is possible to find savings accounts that have high interest rates and favorable bank fees. Some charge no fees at all. This is important because fees can reduce your savings over time.

 

Money Market Accounts Explained

A money market account is a combination of a savings account and a checking account. Money market accounts typically offer higher interest rates than savings and checking accounts. Of course, this is dependent on what the bank you are working with offers. 

With a money market account, you are normally given an ATM card and the ability to write checks. These two options make it easier to access your money than a standard savings account. Bear in mind that not all money market accounts have these features. In some cases, you must request the checks or card.

One challenge that most savers have with money market accounts is that they usually require a sizable amount to open. These accounts also feature a required minimum balance that you must maintain in order to escape bank fees.

 

Checking Accounts Explained

A checking account is an account held at a bank that gives you the opportunity to withdraw and deposit funds. These accounts are also called transactional accounts or demand accounts. Checking accounts offer a high level of liquidity. You can access your money by way of checks, automated teller machines, and electronic debit cards. 

One of the major differences between a checking account and a savings account is that it allows several withdrawals and does not place a cap on deposits. Savings accounts, on the other hand, tend to have limits on withdrawals and deposits. Checking accounts do not feature high minimum balances like money market accounts. A money market account usually has a limit on the number of transactions that you can make.

 

Final Thoughts

Savings accounts, checking accounts, and money market accounts all have their own advantages and disadvantages. In deciding which one to open, you must consider your spending habits and your financial goals.

Rahul Iyer