Business Money Market vs High-Yield Savings: Which Is Best?
This article is part of a larger series on Business Banking.
Business money market (MMA) and high-yield savings accounts are two interest-bearing deposit accounts businesses can use to earn passive revenue on a company’s reserve funds. The two accounts are very similar, and the terms are often used interchangeably, even though there are slight differences between money market and savings accounts.
Business money market accounts often allow you to write checks, while many savings accounts don’t offer checks. In addition, money market accounts typically earn a slightly higher interest yield than a business savings account but often require a higher minimum balance. Both are Federal Deposit Insurance Corporation (FDIC)-insured for up to $250,000 per account holder.
Both accounts usually have monthly fees that are often waivable if minimum balances are met. Both may have monthly transaction limits, with excess transactions resulting in fees. These limits aren’t federally required by the FDIC anymore, but many banks still enforce those limits. Some accounts with consistent excess transactions may be reclassified to non-interest-bearing accounts.
If you’re interested in opening a business money market or high-yield savings account, First Internet Bank is a great choice. You can earn either 2.53% or 3.87% annual percentage yield (APY) depending on your balance in an MMA and can earn 0.90% APY in a savings account. Visit First Internet Bank for more information.
Comparing Business Money Market Accounts, CDs, and Business Savings Accounts
There are three types of business bank accounts that allow you to earn interest on reserve business funds. In addition to business MMAs and high-yield savings accounts, you could choose to open a business certificate of deposit (CD). The table below compares some of the differences between the three account types.
Best for | Businesses with large reserves they don’t need to access regularly | Businesses with very large reserves they won’t need to access for months or years | Businesses with smaller reserves they might need to access regularly |
Interest Rate Offered | Similar to, but usually higher than, savings; lower than CD | Highest of the three | Similar to, but usually lower than, money market; lower than CD |
Liquidity of Funds | Can withdraw funds anytime, subject to monthly transaction limits | Unable to withdraw money for a fixed period; early withdrawal penalties are very high | Can withdraw funds anytime, subject to monthly transaction limits |
Check Writing Capabilities | Yes | No | Usually no |
Relative Minimum Deposit | Highest of the three | Similar to money market but higher than savings | Often the lowest |
When To Use a Business Money Market Account
When comparing business savings vs MMA accounts, choose the latter when:
- You need to occasionally write checks from the account
- You can meet the usually higher minimum balance requirement with a business MMA
- Your business has a large amount of excess cash in your business checking account
Business Money Market Account Pros & Cons
| PROS | CONS |
|---|---|
| You earn strong interest returns on your business reserves. | Some accounts have high minimum balance requirements that might result in monthly fees or limited interest earning. |
| It is a low-risk investment, with funds insured by the FDIC for up to $250,000. | Penalties for exceeding six monthly transactions can include fees or account reclassification. |
| Slightly more liquid than high-yield savings due to check-writing ability | Inflated introductory rates with some banks could have you looking for a new account after the intro period ends and APY drops. |
When To Use a Business High-Yield Savings Account
When comparing business savings vs MMA accounts, choose the former when:
- You might not have enough reserve funds to meet the higher minimum requirements of business money market accounts
- You want to build an emergency fund for your business and don’t need frequent access to withdraw funds
- You don’t need to write checks to move money out of the account
Business High-Yield Savings Account Pros & Cons
| PROS | CONS |
|---|---|
| You earn solid interest returns on your business reserves. | Often lower interest yield than business money market accounts. |
| It is a low-risk investment, with funds insured by the FDIC for up to $250,000. | Penalties for exceeding six monthly transactions can include fees or account reclassification. |
| Likely lower minimum balance requirements than business money market accounts. | Inflated introductory rates with some banks could have you looking for a new account after the intro period ends and APY drops. |
When To Consider an Alternative
There may be times when a business certificate of deposit or an interest-bearing business checking account is a better option.
Choose a business CD when:
- Have financial reserves that you can leave untouched for several months or years
- Want to earn higher interest returns and are willing to sacrifice liquidity of reserve funds
- Are OK with potentially paying a penalty if you have to withdraw the money early
- Have other reserve funds in a savings or MMA account that can be used for unexpected expenses
Choose an interest-earning business checking account when:
- When you need your funds completely liquid with no transaction limits
- You’re willing to earn less interest to keep your funds liquid
- You want largely fee-free banking
First Internet Bank also offers outstanding business CD options, with APY of up to 4.65%. Bluevine is a great choice for an interest-bearing checking account with 2.0% APY on qualifying balances of $100,000 or less.
Check out our guide on how to open a business bank account before opening any new account.
Frequently Asked Questions (FAQs)
Which pays a higher return, a savings account or money market?
Typically a business money market account will pay a higher return than a business savings account. However, some high-yield business savings accounts can have a similar rate to a money market account.
Can a business use a money market account?
A business can use a money market account, but it should open a business-specific money market account. A business money market account will allow companies to earn a high interest yield from reserve funds with a higher degree of liquidity than a business CD.
What is the difference between an MMA and savings account?
There aren’t many differences between a business money market account and a business savings account. Business money market accounts typically have a higher yield than business savings accounts. Also, you typically can write checks with a business MMA while business savings accounts often don’t allow for check-writing capabilities.
Bottom Line
Business money market and high-yield savings accounts are very similar. With business accounts, when a bank is talking about a high-yield business savings account, they’re often referring to a business MMA. There are only slight differences between the two accounts. If you occasionally need to write checks from your account or want to earn a slightly higher yield, a business money market account is the best choice. If you might not have enough reserves to meet the higher minimum balance requirements of an MMA, choose a business high-yield savings account instead.
