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What Is a Money Market Account?

Banking, Savings Accounts
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What Is a Money Market Account? Should I Get One?

A money market account is a savings account, but its interest rate is generally higher than the basic savings rate. The trade-off? It usually requires a higher minimum balance.

An MMA is like your basic savings account’s more mature sibling, and it’s an option worth considering if you’re looking for a safe place to deposit a large chunk of money and earn a little interest.

» MORE: NerdWallet’s best money market accounts

Here’s what a money market account isn’t:

  • It isn’t a checking account. Some MMAs have check-writing and debit card features. But, as with savings accounts, they are limited by the Federal Reserve to six “convenient” transfers or withdrawals a month — including by check, debit card swipe or online transfer.
  • It isn’t a money market fund, which loses value if the market falls. MMAs are backed by the Federal Deposit Insurance Corporation (at banks) and the National Credit Union Administration (at credit unions), up to $250,000 per depositor.

Consider opening a money market account if:

  • You want the safety of a bank or credit union.
  • You’d like a higher interest rate.
  • You want access to funds in a pinch.
  • You need the ability to write a few checks.

A money market account could be a good place to store your emergency fund. Like a basic savings account, it would be separate from your daily use. But with a higher yield, your funds might grow a bit faster, and you could write a check from your money market account to cover whatever surprise arises.

Don’t expect to see quick gains, though. Rates are low across the board on federally insured accounts, including checking, savings and money market accounts and CDs.

Be sure to investigate your options: If you want growth but access to your money, you may be better off opening an interest-bearing checking account. If you don’t care about writing checks, you can find comparable or better rates with some high-yield online savings accounts. And if you just want the bank account with the highest return and can afford to set this money aside for months or years, a CD could fill the bill.

» MORE: Checking, savings, CD or money market account?

What to look for in a money market account

If you decide to open a money market account, look for one with the best rates and no monthly fees. It should also have a reasonable minimum balance. Some institutions require as much as $10,000 just to open an account.

Money market accounts have their limitations. But if you can overcome them, the accounts offer a safe place to park and maybe even grow your money.

Updated March 10, 2017.

Margarette Burnette is a staff writer at NerdWallet, a personal finance website. Email: mburnette@nerdwallet.com. Twitter: @margarette.