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What Is a Money Market Account?

Money market accounts pay rates similar to savings accounts and have some checking features.
May 4, 2018
Banking, Savings Accounts
What Is a Money Market Account? Should I Get One?
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What is a money market account?

A money market account is a savings account that may come with higher interest rates than other savings accounts plus checks or a debit card. But MMAs often require much higher minimum deposits and balances. And although MMA interest rates have historically been higher than those of basic savings accounts, many currently are roughly the same. So comparing rates is an essential first step when considering a money market account.

Money market accounts are insured by the Federal Deposit Insurance Corp. at banks and the National Credit Union Administration at credit unions.

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

Should I open a money market account?

A money market account is worth considering if you’re looking for a safe place to deposit a large chunk of money and earn some interest.  Here are good reasons to open an MMA:

  • Your bank’s money market account has a high interest rate
  • You want access to funds in a pinch
  • You need the ability to write up to six checks per month
  • You want a debit card on your account that you can use up to six times per month
  • You plan to deposit several thousand dollars and want the safety of an insured account at a bank or credit union

Be sure to shop around to make sure an MMA is the best option. High-yield savings accounts often have better interest rates and lower minimum deposits.

A side-by-side comparison



Money Market Account






Money Market Account

 


Savings account

APY



1.60%





Monthly fees



$0





Minimum deposit



$10,000



APY



1.50%





Monthly fees



$0





Minimum deposit



$2,500



APY



1.80%





Monthly fees



$0





Minimum deposit



$1



See more high-yield savings accounts

A money market or high-yield savings account also could be a good place to store your emergency fund. It’s smart to keep this money separate from your daily-use checking account, and a higher yield might help your funds grow a bit faster. With an MMA, you could also write a check to cover any surprise expenses, if your bank offers that feature.

How to choose a money market account

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

Look for a money market account with the best rates and no monthly fees. It also should have a reasonable minimum balance.

For more help, read our expert reviews of the five best money market accounts for 2018. They have good rates and are at institutions that score well for customer service and convenience.

Money market accounts have their limitations. But if they don’t interfere with your overall financial goals, the accounts can offer a safe place to save and grow your money.

» You can compare a wider range of money market accounts by entering your ZIP code and a minimum deposit to get the best money market rates.

Money market accounts vs. other accounts

MMAs have features that overlap those of other bank accounts, but there are important differences.

Type of accountHow is the interest rate?Why open this account?
Money market accountCompetitive with savings account rates
  • You may be able to get a better interest rate than you would with a regular savings account
  • You want to be able to write checks or make debit card purchases on the account (up to 6 times a month without penalty)
Savings accountCompetitive with money market account rates
  • Some online savings accounts feature top-of-class interest rates
  • You want quick access to your money
Certificates of deposit (CDs)Generally highest of all bank accounts
  • You don't need access to your money for months or even years

  • You want higher interest rates, without the risk of investing in the equity markets (Learn more about how timing and risk tolerance should determine where you put your money)
Type of accountWhy open this account?
Money market account
  • You may be able to write checks or make debit card purchases on the account (up to 6 times a month without penalty)
  • Interest rates are competitive with high-yield savings account rates
Savings account
  • You want quick access to your money
  • Some online savings accounts feature APYs that meet or beat top MMA interest rates
Certificates of deposit (CDs)
  • You don't need access to your money for months or even years

  • You want interest rates that are generally the highest of all bank accounts, without the risk of investing in the equity markets (Learn more about how timing and risk tolerance should determine where you put your money)

 

Take note of some crucial differences:

  • A money market account is not a money market fund, an investment that could lose value if the market falls. Money market accounts are backed by the FDIC or NCUA, up to $250,000 per depositor.
  • An MMA is not a checking account. Some money market accounts have check-writing and debit card features. But, as with regular 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. If you want the ability to write checks and make frequent withdrawals, you may be better off opening an interest-bearing checking account. (You can look for high-interest accounts by entering your ZIP code and minimum deposit in our interest checking tool.)
  • An MMA is a type of savings account that may allow you to write checks. If you want a basic account and aren’t interested in checks, you can find comparable or better rates with some high-yield online savings accounts. Check this list of savings accounts with top yields.
  • Another type of savings account is a certificate of deposit. It requires you to set aside money for months or years, while an MMA allows easier withdrawals. But a CD could fit the bill if you want to earn better rates and can afford to stash your cash for a while. NerdWallet does a roundup of the best CD rates by month.

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

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