Money market account vs. checking account: Which is best for you?

If you’re looking for a new bank account that allows you to easily store as well as access your cash, you might be thinking about opening a money market or checking account. But how do you know which to choose? Decisions, decisions. Both types of accounts have unique advantages, depending on your savings and spending goals.

“Think about how you will be using the money within the account,” says Jill Emanuel, lead financial coach at a financial coaching business. “Is this money for daily, weekly, or monthly use? Or is it money that will not be needed regularly?”

You’ll probably need a little more to go on before answering the question, “How do I decide between a money market or checking account?” No worries. Our roundup delves into the features of both types of accounts to help you determine which one could be right for your financial plans, or if there’s room for both in your money mix.

Get easy access to your funds with a checking account

Opening an online checking account is fairly simple and allows you to write checks and make purchases with a debit card from the money you deposit into the account. That debit card can also be used to withdraw cash from the account via an ATM. 

When deciding between a money market account or checking account, Emanuel says most people use a checking account for the primary management of their monthly income (i.e., where a portion of your paycheck is deposited) and daily expenses (often small and frequent transactions). “A checking account makes the most sense as the account where the majority of your transactions occur,” she adds. This is because a checking account typically comes with an unlimited number of transactions—whether you’re withdrawing cash from an ATM, transferring money to a savings account, or swiping your debit card.

While a checking account is a good home base for your finances and a go-to if you need to access your funds easily and quickly, this account type typically earns little to no interest. Spoiler: This is one key difference when you’re comparing a money market account vs. a checking account.

Grow your balance with a money market account

When you’re comparing a money market account vs. a checking account, think of a money market account as a savings vehicle that allows you to earn interest on the balance you keep in the account.

“A money market account is an interest-bearing bank account that typically has a higher interest rate than a checking account,” says Bola Sokunbi, founder of a personal finance education website. 

With some money market accounts, you can even earn more interest with a higher balance. Thanks to its interest-earning potential, a money market account can be the way to go if you’re looking for an account to help you reach your savings goals and priorities.

If you’re deciding between a money market or checking account, you may think that a money market account seems like a typical savings account with your ability to earn, but it also has some features similar to a checking account. With a money market account, for example, you can withdraw cash from an ATM and use a debit card or checks to access money from the account. There are no limits on ATM withdrawals or official checks mailed to you.

Don’t need regular access to your funds and want your money to grow until you do need it? Then the benefits of a money market account could be for you.

Deciding between a money market or checking account

Still debating money market or checking account? Here are some financial scenarios to help you determine which account may best suit your current needs and goals:

Go with a checking account if…

• You want to keep your funds liquid. If you’re considering a money market or checking account, know that a checking account is built for very regular access to your funds. “If you plan to use your account for monthly bill payments and day-to-day transactions, you would be better suited with a checking account, as these support daily and frequent use,” Sokunbi says. Think rent, cable, utilities, groceries, gas, maybe that morning caffeine craving. You get the idea.
• You want to earn rewards for your spending. When you’re comparing the difference between checking and money market accounts, consider that with some checking accounts—like Discover® Cashback Debit—you can earn cash back for your debit card purchases. The best part is you are earning cash back as you keep up with your regular expenses—no hoops to jump through or extra account activity needed. Then put that cash back toward fun things like date night, lunch at your favorite spot, or a savings fund dedicated to something special.

Earn cash back with your debit card

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• You want to deposit and withdraw without the stress of a balance requirement. If you do your research when comparing the difference between checking and money market accounts, you’ll find that some checking accounts don’t require a minimum balance (or much of one). However, you may be required to maintain a minimum balance (and potentially a higher one) with a money market account to avoid a fee. If you’re accessing your money frequently and need to make large withdrawals, consider the benefits of a no-fee checking account.

Go with a money market account if…

• You want to earn interest. “If your money is just sitting there, it should be earning money,” Emanuel says of the money market account or checking account question. “I spoke with a woman recently who told me she’d had around $50,000 sitting in her checking account for at least the last 10 years, if not longer. If that money had been in a money market account for the same period of time, she would have earned thousands of dollars on it. Instead, she earned nothing,” Emanuel says.
• You want to put short-term savings in a different account. If you have some short-term savings goals in mind (way to go!), you may benefit from keeping your savings separate from your more transactional checking account, so you don’t dip into them for a different purpose. That whole out of sight, out of mind thing. “A money market account is the perfect place for money that will be accessed less frequently, such as an emergency fund (a.k.a. rainy-day fund), a vacation fund or a place to park money after you’ve received an inheritance, or proceeds from selling a home,” Emanuel says.
• You need an account to fund your overdraft protection. If you’re comparing money market account vs. checking account, consider that a money market account could also cross over to support spending goals. One way is in the form of overdraft protection. If you enroll in overdraft protection for your checking account, for example, you could designate that funds be pulled from your money market account to cover a balance shortfall.

Using both accounts to achieve your financial goals

Speaking of crossover, both spending and saving are vying for your attention, right? Consider leveraging both types of accounts if you have needs from the checking and money market account lists above.

“Personally, I use my checking account for bill payments, my day-to-day spending, writing checks, and for any automatic debits I have each month,” Sokunbi says. She’s added a money market account to the mix “because of the higher interest rate—to store my savings for short-term goals, for investing or for money I’ll be needing soon,” she explains. Maybe it’s not about deciding between a money market or a checking account but getting the best of both worlds.

Before opening a money market or checking account, do your research and compare your options to see which bank offers the best package of low or no fees and customer service, in addition to what you need from an interest and access-to-cash perspective.

Now that you know the difference between checking and money market accounts, maybe you want to add some savings accounts to the mix? Learn how multiple savings accounts can help you save more. 

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The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.