What Is a Money Market Account?

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What is a money market account?

A money market account (MMA) is a type of savings account offered by banks and credit unions that often includes features like check-writing and debit cards. The accounts typically limit the number of these purchases and transfers to six each month. ATM withdrawals are usually not capped.

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

How does a money market account work?

Money market accounts work similarly to savings accounts. You can make deposits and earn interest on your funds. Deposits are insured by the Federal Deposit Insurance Corp. at banks and the National Credit Union Administration at credit unions. Your money is protected if the financial institution goes out of business, up to $250,000 per depositor, per institution, per deposit category (examples of categories are single and joint accounts).

» 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.

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

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

Cons

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

Rates might be lower compared to some high-yield savings accounts.

Access to money with checks and debit cards could encourage 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.

» Learn more about money market accounts compared to savings accounts

How to choose a money market account

Look for a money market account with a high interest rate and no monthly fee. Some institutions require $10,000 or more to earn their best rates or avoid a fee, while others have no minimum. Find an account that has a minimum opening balance you can cover.

» Ready to open an account? Read our primer on how to open a bank account online

Here are more details on these three different types of savings accounts:

Type of account	Why open this account?
Money market account	Typically offers the ability to write checks or make debit card purchases (may be limited to six times a month). Interest rate: Competitive with savings accounts (though often lower than top CD rates).
Savings account	Usually has a lower minimum opening deposit and lower balance requirement than a money market account. Interest rate: Competitive with money market accounts (though often lower than top CD rates). High-yield savings accounts earn more than some high-yield MMAs. (Read more about high-interest savings accounts.)
Certificates of deposit (CDs)	Interest rate: Generally highest of all bank accounts. (See the best CD rates this month.) Earn interest on a chunk of money you won’t need for months or years. Get higher yields without the risk of investing in the equity markets. (Learn more about different types of short-term investments.)

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

Money market fund: A money market account is not the same as a money market fund, which is an investment that could lose value and is not federally insured.

» Want to learn more about investing in the stock market? Check out our guide for beginners

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.