Differences Between Ally Bank's Savings and Money Market Accounts

I've seen questions asking about the differences between Ally Bank's Online Savings Account and its Money Market Account. When you first look at Ally Bank's website, you'll notice the rates of these two accounts are the same. So it's not obvious how they differ. If you look a little closer, you'll find there's a FAQ that gives a basic answer to this question:

The main difference is in how you access your money. A money market account gives you more access because you can be issued a Visa® Debit Card and checks for these accounts. An online savings account does not support the use of checks and does not come with a debit card.

It's important to note that there are Federal limits on transactions from U.S. savings and money market accounts.

You can always call us and request a check made out to you. You can also make unlimited deposits and ATM withdrawals. But, Federal law limits other electronic, telephone and check transactions to a total of 6 per statement cycle. These limited transactions can be to other accounts or to a third party. If you go over the limit we charge $10 per transaction.

As you can, there are only two differences. The money market account provides limited check writing and a debit card. The savings account doesn't offer these.

Regulation D

As the FAQ states, both savings and money market accounts are subject to Federal regulation. Specifically, it's Regulation D which limits the number of transactions on savings and money market accounts. In section §204.2(d)(2) of the regulation, the details are provided. Below is an excerpt:

The term “savings deposit” also means: A deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account (MMDA), that otherwise meets the requirements of §204.2(d)(1) and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction, or by check, draft, debit card, or similar order made by the depositor and payable to third parties.

In 2009 the Federal Reserve revised Regulation D which increased the limit on the number of check transactions from 3 to 6, the same number for the other third-party withdrawals.

It's important to note that this withdrawal limit is independent on each account. So if you have both the Ally savings and money market account, you can have up to 6 withdrawals for the savings account and 6 withdrawals for the money market account. If you need more than 12 withdrawals, you should consider Ally Bank's Interest Checking Account which has no withdrawal limitations.

It's Not a Money Market Fund

Another important thing to note is that money market accounts are different than money market funds. The name money market account is short for money market deposit account. It's a bank account that's FDIC insured. In contrast, a money market fund is a mutual fund that invests in short-term debt securities such as US Treasury bills. Cash held in money market funds is generally not FDIC insured. There have been cases when money market funds have lost money.

General Savings & Money Market Account Differences

Regulation D doesn't describe differences between savings and money market accounts. Traditionally, money market accounts and savings accounts have some differences, but there are no rules that require these differences. First, as in the case at Ally Bank, savings accounts generally lack checks and debit cards while money market accounts have these. Unlike Ally Bank, money market accounts often have rate tiers with higher rates for larger balances. In the case of Ally Bank, neither the savings nor the money market accounts have rate tiers. Also unlike Ally Bank, money market accounts more often have monthly service charges for small balances. Both Ally Bank accounts have no monthly service charges and no minimum balance requirements.

Rate Differences

Banks often have different rates for their savings and money market accounts. In some cases, the money market accounts have higher rates (like at Sallie Mae Bank), but there are also cases in which the savings account has the higher rate (like at Discover Bank).

Ally Bank's savings account used to have higher rates than its money market account. When Ally had the name GMAC Bank, the money market account was the only liquid account option. Then in September 2008 GMAC Bank launched its Online Savings Account. At that time the savings account had a higher rate than the money market account, and this continued until late 2009. Since December 2009, there have been no rate differences between the two accounts.