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Credit Union Money Market Account vs. Regular Savings Account

Saving your money is one of the best ways to feel financially empowered. If you have an emergency pop up unexpectedly, you can breathe easier knowing you have money saved to cover the cost. But when it comes to saving your money, does a credit union money market account or a regular savings account work best?

They each operate a little differently, so we’ll break it down. Whichever you decide is right for you, you’ll find it here at Capital Credit Union.
How Does a Savings Account Work?
Savings accounts are accounts in which you can deposit money, accrue interest, and withdraw funds as needed. Unlike checking accounts, you typically are unable to write checks through your savings account. However, you may be able to make ATM withdrawals by using a debit card.

Keep in mind, though, that since a savings account is designed to help you save money, you may be limited in how many withdrawals you can make from your savings account each month. For instance, you may be capped at six withdrawals per month depending on your financial institution.

How Does a Money Market Account Work?
Like savings accounts, money market accounts also accrue interest. But unlike savings accounts, money market accounts have some checking account-type features. For instance, you can typically write checks from a money market account or use a debit card to make purchases. Think of a money market account as falling somewhere in between a checking account and savings account.

Here’s an overview of the pros and cons of a credit union money market account and a regular savings account.

What to Expect From a Savings Account
Savings Account Pros
  1. Small opening deposit: You can often open a savings account with a small deposit. The deposit required is often $25 or smaller. At Capital Credit Union, it’s just $5! So, if you’re just starting to build up your savings, you may want to opt for a traditional savings account.

  2. Low minimum balance requirements: Savings accounts have no or low minimum balance requirements. If you’re uncertain how much money you’ll be able to save or you want to be able to withdraw your savings at any time without worrying about maintaining the minimum balance required, a traditional savings account could provide you with more flexibility than a money market account.

Savings Account Cons
  1. Lower interest rates: When it comes to building up your savings, interest rates can be one of your greatest allies. The higher the interest rate, the more money you’ll be able to accrue. But generally speaking, savings accounts have lower interest rates than money market accounts.

  2. Fewer ways to access cash: If you want to be able to access your savings by writing a check or using a debit card, a money market account may suit your needs better. However, you may be able to link your savings account with your checking account so you can easily transfer funds between them.

What to Expect from a Money Market Account
Money Market Account Pros
  1. Higher interest rates: Typically, money market accounts offer higher interest rates—or in the case of a credit union money market account, higher dividend rates—than traditional savings accounts. The more money you’re able to earn in interest or dividends, the quicker you’re able to build a safety net with your savings.

    At Capital Credit Union, you’ll earn a dividend rate based on the amount of money you deposit into your account. As your balance increases, so does the dividend rate. Plus, dividends compound monthly. So sit back and watch your money grow quickly.

  2. Checking account features: Money market accounts allow you to easily access funds by check or debit card, much like a checking account.

Money Market Account Cons
  1. Larger opening deposit required: Money market accounts usually require a larger opening deposit. For instance, at Capital Credit Union, you’ll need a minimum deposit of $2,500 to open a money market account, compared to the $5 required for opening a savings account.

    Some accounts may also have minimum balance requirements. If your balance drops below the minimum amount, you may incur a fee. Ask your financial institution what the requirements are.

  2. Monthly fees: Some financial institutions charge a monthly service fee, regardless of whether you meet the minimum balance requirements. If you’re going to be assessed a monthly service fee on the account, be sure the interest rate on the account is high enough to offset the monthly charges.

    Keep in mind that this doesn’t apply to money market accounts at Capital Credit Union. We believe you should keep what’s yours. So when you open a money market account with us, there is no monthly service fee.

  3. Withdrawal limits: As with some savings accounts, you may be limited in the number of withdrawals you can make in any given month. Typically, you will be capped at six withdrawals monthly. If you exceed the withdrawal limits, a fee may apply. So it’s a good idea to inquire about any withdrawal limits ahead of time.

Which Is Right for You—Credit Union Money Market Account or Savings Account?
Which account is more suitable for you? Well, that depends on your financial situation and savings goals. You should compare rates, fees, and balance requirements to decide which account better suits your needs.

Have a specific financial goal in mind? Want to see how long it will take you to get there? Use our savings goal calculator. You’re able to input your initial savings amount, expected return, and monthly contributions while also accounting for inflation. It’s a valuable tool for visualizing how long it will take you to reach your savings goals and what you need to do to get there.

If you want personalized recommendations based on your specific financial situation, talk to the team at Capital Credit Union. We’ll guide you toward the right financial path so your future goals and dreams are well within your reach.

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