Here’s a fun challenge–visit the savings account page of a credit union’s website, including First Alliance Credit Union, and look for find money market accounts. Odds are you won’t be able to. Instead, they’ll usually have their own page, conspicuously separated from most other types of savings accounts.
This might seem like a minor difference, but you have to admit it’s a little weird. This is especially true since most financial blogs encourage you to open a money market account if you have a large sum of cash in a traditional savings account.
Is a money market account the same thing as a savings account? If it isn’t, what is the difference and how will it affect you?
The answers might be stranger than you think!
Yes and no.
In a lot of ways, a money market account is similar to a traditional savings account. You can store money in them and gain interest, they’re both insured up to $250,000 by the NCUA (or FDIC if you get an account through a bank) and they’re both solid choices for storing money.
However, a money market account has some features that make it different than a traditional savings account.
The difference you’ll encounter as soon as you apply to open a money market account is the minimum deposit requirement. Most money market accounts need around $2,000 to open. In contrast, you usually need at most $20 to open an account at a new credit union (and at First Alliance, you only need $5!)
In return for making this large deposit and maintaining it, you get an exponentially better rate of interest than you would with a traditional savings account. While you might not get as high an interest rate as you would with a long-term CD, for instance, your money won’t be locked up the way it would with a CD.
If one of the main factors that separates a money market account from a savings account is its high interest rate, then a money market account must be a high-yield savings account. Right?
Believe it or not, a high-yield savings account is still separate from a money market account. High-yield savings accounts can match the interest rates money markets offer, but they don't have the same high minimum deposit requirement money market accounts do.
However, money market accounts usually keep your money more accessible than high-yield savings accounts will. For a lot of high-yield savings accounts, you have to wait a couple of days for a bank or credit union to transfer the money from the account to your checking account or traditional savings account. With a money market account, though, you can use your money whenever you need it.
It's worth noting that this accessibility makes money market accounts an ideal choice if you have money you're not planning on spending, but might need access to immediately. These situations can include:
Money markets have a lot of similarities with savings accounts, but they also have some significant differences. They have a much higher minimum deposit requirement than savings accounts, but they make up for it with a higher interest rate. They also keep your money more accessible than other accounts, including many high-yield savings accounts.
If you’ve been saving for a while and have a couple thousand dollars in your account, why not see what a money market account can do? Reach out to a First Alliance Credit Union member experience advisor, and they’ll help you not only get a money market account open, but also show you how to access your money, either through our Advisor Supported Kiosks or through our online banking platform or mobile app!