What Is a Money Market Savings Account?

As interest rates continue to march higher, consumers are increasingly looking for ways to maximize the return they receive for their savings. In addition to traditional savings accounts, another important option to consider is a money market savings account.

A money market savings account is a type of interest-bearing account in which the financial institution invests the money in conservative investments, such as Treasury bonds, at a higher rate than they might on a traditional savings account. For example, the Fifth Third Relationship Money Market Savings account has promotional rates significantly higher than the standard savings rate. Money market savings accounts have variable interest rates, meaning that the amount of interest they pay fluctuates with market interest rates.

In some ways, money market savings accounts combine the features of a traditional savings account and a checking account. Like checking and savings accounts, money market savings accounts come with Federal Deposit Insurance Corporation (FDIC) insurance for up to $250,000 in deposits. Money market savings accounts, also known as money market deposit accounts, also pay interest like savings accounts but they come with the ability to write checks.

Some money market savings accounts have a minimum balance requirement, and others might pay a tiered interest rate, with higher rates going to those accounts with balances above certain thresholds.

In addition to the higher interest rates and check-writing ability, money market accounts have the security of knowing you can’t lose your savings, either during a market downturn or because the financial institution has run into trouble.

Who Should Open a Money Market Account?

Wondering if a money market account is a good option for your financial interests and goals? Money market savings accounts might be a good option for holding funds that you might need in the near or medium term, since you can access funds quickly, but you aren’t planning to make frequent withdrawals. Common uses include holding emergency savings or for specific savings goals such as a wedding, home down payment, or vacation.

Money Market Savings Accounts vs. Certificates of Deposit

Money market savings accounts are like certificates of deposit (CDs), in that they’re both financial products where you can earn a higher return than on a traditional savings account without the risk of losing your principal.

CDs tend to pay higher rates than money market savings accounts, but they often require that you keep your money in the CD for a set period, typically a year or more. If you take money out before that, you could owe a penalty, whereas there are not any restrictions on how long you need to keep your money in a money market savings account.

Another important difference between money market savings accounts and CDs is that money market savings accounts have variable rates, while CDs have fixed rates that remain constant for a predetermined period.

Money Market Savings Accounts vs. Money Market Mutual Funds

While they have similar names, money market savings accounts and money market mutual funds are very different financial products. While you open a money market savings account with a bank or credit union, money market mutual funds are investment accounts purchased through a broker or investment company and are subject to regulation by the U.S. Securities and Exchange Commission.

Money market funds are typically a basket of conservative, short-term investments like Treasury bills and municipal bonds. However, while money market mutual funds are low risk, they do not have FDIC insurance and it is possible (though rare) to lose principal in such an investment. Both types of accounts have variable returns, but the return on money market mutual funds reflects the performance of its investments while the return on money market savings accounts reflects market interest rates.

Another difference between money market savings accounts and money market mutual funds is the ease with which you can pull your money out. With money market savings accounts, you can typically use a debit card or check associated with the account at any time, whereas with a money market mutual fund you may have to roll the funds over into a savings account which could take one business day to process.

Open a Money Market Savings Accounts

Fifth Third is proud to offer a Relationship Money Market Savings account. If you're interested in opening a high interest savings account and taking advantage of these higher rates, please visit a Fifth Third Bank branch for the latest rates, details, and how to open a money market account.