Where to Stash Your Cash: Money Market vs. Checking Account

With so many account types available through your financial institution, it can be overwhelming to know which one best aligns with your goals and needs. Two common options are money market and checking accounts. While they share some similarities, each offers distinct benefits that are important to understand.

What is a Money Market Account?

A money market account is a type of savings account that usually offers a higher yield interest or dividend rate compared to traditional savings and checking accounts. Many money markets are tiered, meaning you earn a higher rate for higher balances. Despite the name, a money market account is not linked to the stock market, so there is no risk of losing the money you deposit. This type of account is best for individuals looking to earn a higher rate on their balance while maintaining access to their funds.

A money market might be a good fit if you:

Money markets work well for emergency funds, large savings reserves, or individuals who want to grow their money passively without locking it into a certificate of deposit (CD) or investment account. While money markets are not locked and allow access to your money, many money markets do have a limit on the number of withdrawals you can make from the account each month, making them less ideal for frequent transactions. Additionally, some financial institutions may require you to maintain a minimum balance in the account.

What is a Checking Account?

A checking account is designed for everyday transactions, allowing account holders to deposit and withdraw money often. Unlike money market accounts, checking accounts prioritize convenience over interest earnings. While some credit unions and banks offer an interest-earning checking account, the rate is usually much lower than a money market account.

Checking accounts are best for day-to-day financial needs, making them essential for budgeting, bill payments, and direct transactions.

Safety and Insurance

At credit unions and banks, both a money market account and a checking account are federally insured by either the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC). This means your deposits are protected against loss for up to $250,000 per depositor. Being federally insured makes these accounts safer options for storing your money compared to third-party payment apps like Venmo, PayPal, or Cash App, which do not offer the same level of insurance protection.

Choosing the Right Account for You

If you are focused on earning interest and growing your savings, a money market account is the better option. If ease of access and daily transactions are your priority, a checking account is the way to go.