Money market deposit accounts vs. money market mutual funds

Money market deposit accounts vs. money market mutual funds

When it comes to managing your money wisely, it's important to understand the various investment options available. Two popular choices for short-term, low-risk investments are money market deposit accounts (MMDAs) and money market mutual funds (MMFs). We’ll explore the primary differences between these two financial instruments, helping you make informed decisions to maximize your financial security and returns.

What are money market deposit accounts (MMDAs)?

Money market deposit accounts (MMDAs), also sometimes known as money market accounts, are a type of bank account that combines the safety of a savings account with the liquidity of a checking account. They are typically offered by banks and credit unions and are an attractive option for individuals looking to park their funds in a secure place while earning interest.

Federal deposit insurance

One of the primary advantages of MMDAs is that they can be offered by FDIC-insured banks or NCUA-insured credit unions. This means your deposits are protected up to $250,000 per depositor, per institution in case of bank or credit union failure.

What are money market deposit accounts (MMDAs)?

Money market mutual funds, or money market funds (MMFs), are a type of mutual fund managed by financial institutions, such as mutual fund companies. These funds pool money from investors and invest in short-term, low-risk securities such as Treasury bills, commercial paper, and certificates of deposit (CDs).

Liquidity and returns

MMFs are known for their high liquidity, allowing investors to buy and redeem shares on any business day. However, unlike MMDAs, MMFs do not guarantee a fixed interest rate. The returns on MMFs can fluctuate based on the performance of the underlying securities.

Understanding the key differences

Now, let's dive deeper into the main differences between money market deposit accounts (MMDAs) and money market mutual funds (MMFs):

Deposit insurance

  • MMDAs: These accounts can be offered by FDIC-insured or NCUA-insured financial institutions, providing a significant level of security for your funds. If an insured bank or credit union fails, your deposits are protected up to $250,000 per individual, per institution.

  • MMFs: While MMFs invest in low-risk assets, a slight element of risk is still involved as they are dependent on market conditions. There remains the potential for an investor’s loss of principal.


  • MMDAs: While money market deposit accounts offer liquidity, they may come with certain restrictions. Some banks limit the monthly withdrawals or transfers you can make from your MMDA. Exceeding these limits can result in fees. The good news is that all money market deposit accounts offered on the Raisin platform come with no withdrawal limits and, most importantly, no fees.

  • MMFs: Money market mutual funds are also relatively liquid. Investors can buy or redeem shares on any business day, providing flexibility and easy access to your funds. This liquidity makes MMFs a suitable choice for individuals who anticipate needing quick access to their money.


  • MMDAs: Money market deposit accounts typically offer an interest rate that is set by the financial institution. While this rate is typically subject to change due to market conditions, it can be relatively stable. The interest rates on MMDAs are variable and tend to be higher than those of checking accounts or traditional savings accounts.M

  • MFs: Money market mutual funds do not guarantee a fixed interest rate. Instead, the returns on MMFs are influenced by the performance of the underlying securities in the fund's portfolio. While MMF returns can vary and are subject to market conditions.

Investment purpose

  • MMDAs: Money market deposit accounts are well-suited for individuals looking for a safe and stable place to park their savings. They may be an excellent choice if you prioritize the security of your principal amount and prefer knowing exactly how much interest you will earn.

  • MMFs: Money market mutual funds are suitable for investors who seek a balance between safety and the potential for higher returns. If you're willing to accept slightly more risk in exchange for the possibility of increased interest earnings, MMFs may be a better fit for your financial goals.

Making an informed decision

Now that you understand the key differences between money market deposit accounts and money market mutual funds, how do you decide which option is right for you? Here are some factors to consider:

  • Risk tolerance

Your risk tolerance plays a crucial role in determining whether an MMDA or an MMF is the better choice for you. If you prioritize safety and are risk-averse, MMDAs with federal deposit insurance may likely be the preferred option. However, if you are comfortable with a slightly higher level of risk in pursuit of potentially higher returns, MMFs may be more appealing.

  • Financial goals

Consider your financial goals when choosing between these two options. Are you saving for a short-term goal like an emergency fund or a major purchase in the near future? MMDAs can provide stability and security for such goals. If you have longer-term goals and can afford some fluctuation in returns, MMFs might align better with your needs.

  • Interest rate expectations

Consider your expectations regarding interest rates. If you believe that interest rates will remain relatively stable, MMDAs provide predictability.

  • Diversification

Think about diversification. If you want a diversified investment portfolio and prefer professional management of your funds, MMFs can provide exposure to a range of short-term securities without the need for individual selection.

Choosing between MMDAs and MMFs

Ultimately, the choice between a money market deposit account and a money market mutual fund depends on your individual financial circumstances, goals, and risk tolerance. MMDAs can be offered covered by federal deposit insurance, have stable interest rates, and a stronger sense of security. MMFs, on the other hand, offer the potential for slightly higher returns and exposure to a diversified portfolio of short-term securities.

To make an informed decision, assess your financial needs and preferences carefully. Consider factors such as risk tolerance, investment goals, liquidity requirements, interest rate expectations, and the level of diversification you desire in your portfolio. By doing so, you can choose the option that aligns best with your unique financial objectives and ultimately helps you confidently achieve your financial goals

Finding top money market deposit account rates

Looking for top money market deposit account rates from FDIC-insured banks and NCUA-insured credit unions? Raisin is here for you.

Raisin is an online savings platform that allows savers to fund and manage products from an exclusive network of insured financial institutions — all within a single account. To view all top offers, simply click below. Find the product that’s right for you and kickstart your savings journey today.

Secure Messaging Center


Call: 844-994-EARN (3276) (Monday to Friday from 9:00 a.m. - 4:00 p.m. ET)

The Raisin name and logo are trademarks of Raisin GmbH. All other trademarks, logos, marks, and brand names are the property of their respective owners — used with permission.

© 2024 Raisin GmbH. All rights reserved.

*APY means Annual Percentage Yield. APY is accurate as of {todayDate}. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.

Raisin is not an FDIC-insured bank or an NCUA-insured credit union, and does not hold any customer funds. Funds deposited through Raisin are exclusively held at federally insured financial institutions. FDIC or NCUA deposit insurance coverage covers the failure of partner banks and credit unions on the Raisin platform.

Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered through Central Bank of Kansas City (CBKC), Member FDIC, d.b.a. Central Payments is the Service Bank. CBKC, Lewis & Clark Bank and Starion Bank, each Member FDIC, are the Custodial Banks.