Your Bank's Money Market Account Averages 0.63%. The Biggest Money Market Funds Pay 3.71%. Same Name, Different Product.

If your bank has your cash in something it calls a “money market account,” find the rate on your last statement. The national average is 0.63%. At Citibank it’s 0.06%, and at PNC it’s 0.04%.

The 100 biggest money market funds averaged 3.71% in mid-October.

Those are two different products. They share two words and almost nothing else, and the bank is fine with you mixing them up.

Same name, different animal

A money market account is a bank deposit. The FDIC lists “Money Market Deposit Accounts” among the products it insures. Your bank sets the rate, and it can set it wherever it likes.

A money market fund is a mutual fund. The SEC describes it as a fund that invests in “liquid, short-term debt securities, cash and cash equivalents,” with dividends that “generally reflect short-term interest rates.” Mutual funds are on the FDIC’s list of products it does not insure.

That second quote explains the whole gap. On September 16 the Fed raised its target range a quarter point, to 3.75 to 4 percent. Money funds hold short-term paper that keeps maturing and getting reinvested, so their payouts track rates like that one. Crane Data says fund yields have spent the weeks since “digest[ing]” the hike. Its index of the 100 largest funds went from 3.51% on August 31 to 3.71% for the week ended October 16. Government funds sold to regular investors averaged 3.43%.

Bank money market accounts are another story. The FDIC’s October table, built from September 30 data, two weeks after the hike, puts the national average at 0.63%.

Bank’s bet: you hear “money market,” remember it as the good account, and never check the number.

What the gap costs

Run it on $25,000 for a year.

At Citibank’s 0.06%, you earn $15. At the 0.63% national average, about $158. Ally’s money market account, an FDIC-insured online account, pays 3.10%, which is $775. A government money fund at Crane’s 3.43% retail average pays about $858.

Leaving $25,000 at 0.06% when an insured account of the same type pays 3.10% a website away is dumb math. That’s $760 a year for nothing.

Choosing between the online account and the fund is your call. Today the typical government fund pays about a third of a point more than Ally. The online account carries FDIC insurance and the fund doesn’t. For your emergency fund, the insured account is the cleaner home. For cash you’re parking between investments at a brokerage, the fund pays more.

Do this

Pull your statement tonight and find the product name. If it’s a deposit account at your bank with an APY under 1%, move it. Compare insured options on our money market account rankings and run the difference through the savings calculator.

If you want the fund, it lives at a brokerage, not a bank. Every fund on Crane’s top-yield list carries a ticker ending in XX, and the top retail ones paid 3.88% to 3.94% on October 20. Read the prospectus before you buy, which is the SEC’s advice too, and know that you’re buying an investment, not opening a deposit.

The Fed meets again October 27 and 28. Whatever it does, watch which of your accounts moves within a week. That tells you who’s been paying attention to your money.

The fine print on these numbers

The FDIC’s money market figure averages the $10,000 and $100,000 tiers and weights each bank by its share of deposits, so big banks pull it down. The Citibank and PNC rates come from MyBankTracker data dated October 13, as shown on Ally’s comparison table for California. Crane’s figures are annualized 7-day yields after fund expenses and change daily. Our September look at the FDIC’s savings cap covers the same gap for plain savings accounts.

How Candid Yak makes money. Some of the products we write about pay us if you apply or sign up through our links. That never changes our verdict, our rankings, or the numbers in this article. We call a bad deal a bad deal whether it pays us or not. Some brands shown in our comparison tools are placeholder examples while we finalize partner agreements, and we label them as such.