What Is a Money Market Account?

What is a money market account?

A money market account (MMA) is a savings account that may also have debit card and check-writing privileges. The accounts typically limit the number of purchases and transfers to six each month. ATM withdrawals usually are not capped.

Traditionally, money market accounts often offered higher interest rates compared with regular savings accounts. But these days, rates are similar. However, many MMAs have higher minimum deposit or balance requirements than regular savings accounts.

Deposits are insured by the Federal Deposit Insurance Corp. at banks and the National Credit Union Administration at credit unions. Your money is protected, up to $250,000 per depositor, if the financial institution goes out of business.

» Want to compare rates? See our list of the best money market accounts

What are the pros and cons of money market accounts?

Is a money market account worth it? That depends. If you’re considering one, keep these pros and cons in mind.

Pros

• Better rates than typical checking accounts and some savings accounts.

• Safe place to keep a large chunk of money, protected by FDIC or NCUA insurance.

• Easier access to funds than with traditional savings accounts because of debit card and check features, which might be helpful in an emergency.

Cons

• Some institutions require high minimum balances to open an account or avoid fees.

• Rates are lower compared with some high-yield savings accounts.

• Access to money with checks and debit cards could encourage impulse spending, which might make it harder to save.

When to choose a money market account over a savings account

If your bank pays better or the same rate on its standard savings account as a money market account, and your goal is to park your funds and watch your bank balance grow, it might be worth sticking with the savings account. But if the money market’s rate is higher than the savings account, or you need to make an occasional purchase from the account, and you can meet any minimum balance requirement, it could be a good idea to open a money market account.

Compare money market accounts

How to choose a money market account

Look for a money market account with a high interest rate and no monthly fee. The account should also have a low minimum balance — less than $1,000 is often attainable. Some institutions require $10,000 or more to earn the best rates or avoid a fee, while others have no minimum.

» Want to compare money market accounts in your area? See these money market options by region

Money market accounts vs. other accounts

Money market accounts have features that overlap with those of other bank accounts, but there are important differences. Consider how they compare with other savings accounts:

Money market accounts also have crucial differences from other types of bank accounts:

• Money market fund: A money market account is not the same thing as a money market fund, which is an investment that could lose value if the market falls. Unlike money market funds, money market accounts are federally insured by the FDIC or NCUA.

• Checking account: A money market account isn’t a checking account. MMAs may have check-writing and debit card features, but, as with regular savings accounts, they can be limited to six “convenient” transfers or withdrawals a month. That includes transactions by check, debit card swipe or online transfer. If you want to earn yields while also having the ability to write checks and make frequent withdrawals, you may be better off opening a checking account that earns interest. You can look for interest-bearing options in NerdWallet's list of best checking accounts.