High-Yield Savings vs Money Market Comparison
HYSAs (Ally, Marcus, Discover) offer 4.0-4.4% APY with FDIC insurance to $250K. Money market funds (VMFXX, SPRXX, SWVXX) offer 4.4-4.8% APY with SIPC protection. HYSA wins on safety perception; money market wins on yield. Tax treatment matters for high-state-tax households.
HYSA Characteristics
High-yield savings accounts offered by online banks: Ally Bank (4.20% APY), Marcus by Goldman Sachs (4.40%), Discover (4.25%), Capital One (4.25%) as of May 2026. FDIC insured to $250K per depositor per bank. Daily compounding, monthly interest credited. No minimum balance typically. Transfer to checking 1-3 days. Interest fully federal AND state taxable.
Money Market Fund Characteristics
Money market funds invest in short-term Treasuries, government repos, commercial paper. Vanguard VMFXX (4.65%), Fidelity SPRXX (4.55%), Schwab SWVXX (4.60%), Vanguard VUSXX (4.55% — 100% Treasury). SIPC protected to $500K per brokerage account. Net Asset Value stable at $1.00. Same-day liquidity. Yields track Fed Funds Rate. Federal tax, partial state-tax exempt based on Treasury content.
Tax-Adjusted Yield Comparison
High-state-tax investor in California (13.3% state): VMFXX 70% Treasury = 9.3% effective tax exemption = roughly 0.43% yield uplift over taxable HYSA. Over $75K balance = $322/yr more after tax. VUSXX 100% Treasury = full state exemption = roughly 0.61% uplift = $460/yr more. State tax savings often exceed nominal yield difference between MMF and HYSA.
Source: FDIC Quarterly Banking Profile 2025, ICI Money Market Fund Statistics 2025. Last updated: May 2026.