A money market account is a hybrid between a savings account and a checking account

A money market account is a bank deposit account that combines features from both savings and checking accounts. You earn interest on your balance—like a savings account does—but you also get a debit card or checkbook to withdraw money—like a checking account does. The tradeoff is that banks limit how many withdrawals you can make each month, and they usually require a higher opening deposit than a regular savings account.

The name comes from the money market, which is where banks themselves borrow and lend short-term funds. Your deposits help fund that activity, so the bank pays you interest in return. The interest rate on a money market account is typically higher than what you'd earn in a standard savings account, though it still varies by bank and changes over time.

Key Takeaways

  • Money market accounts earn interest like savings accounts but let you withdraw money with a debit card or checks like checking accounts.
  • Banks limit the number of withdrawals you can make each month—typically six per month—to keep the account classified as a savings product.
  • Most money market accounts require a higher minimum opening deposit than regular savings accounts, often $2,500 or more depending on the bank.
  • The interest rate on a money market account changes regularly and is usually higher than a savings account but lower than a certificate of deposit.

How withdrawals and deposits work

You can deposit money into a money market account the same way you would a savings account: through direct deposit, transfers from another account, or by depositing a check or cash at a branch. Deposits are unlimited—you can add money as often as you want.

Withdrawals are where the restriction kicks in. Federal rules historically limited you to six withdrawals per month from a money market account (the limit was relaxed during the pandemic but many banks kept their own limits in place). You can withdraw by debit card, by check, or by transferring money to another account. Once you hit your bank's withdrawal limit for the month, you cannot withdraw again until the next month begins. If you try to withdraw beyond the limit, the bank will either decline the transaction or charge you a fee.

This withdrawal limit exists because the Federal Reserve classifies money market accounts as savings products, not transaction accounts. Banks that want to offer higher interest rates must follow these rules to maintain that classification.

Minimum balance requirements and fees

Most banks require you to maintain a minimum balance in a money market account to earn the advertised interest rate. This minimum varies widely—some banks ask for $2,500, others for $10,000 or more. If your balance drops below the minimum, the bank may lower your interest rate, charge a monthly fee, or both.

Common fees on money market accounts include a monthly maintenance fee (usually $5 to $15), an overdraft fee if you withdraw more than your balance, and a fee for exceeding your monthly withdrawal limit. Some banks waive the monthly fee if you maintain a high enough balance or set up direct deposit. Read the fee schedule before opening an account—the interest you earn can easily be eaten up by fees if you do not meet the bank's requirements.

Interest rates and how they change

The interest rate on a money market account is variable, meaning it can go up or down. Banks set their own rates based on the federal funds rate, which is the rate the Federal Reserve uses to guide short-term borrowing between banks. When the Fed raises its rate, banks typically raise money market rates within weeks or months. When the Fed lowers its rate, money market rates fall as well.

You should compare rates across banks before opening an account, but understand that the rate you see today may not be the rate you earn six months from now. Online banks and credit unions often offer higher money market rates than large national banks, though they may also have higher minimum balance requirements. The interest compounds daily or monthly depending on the bank, meaning you earn interest on your interest.

Money market accounts versus savings accounts

The main difference is access and interest. A money market account lets you write checks or use a debit card to withdraw money, while a savings account typically does not. In return, a money market account limits your withdrawals to a set number per month, while a savings account may have no withdrawal limit (though federal rules once capped savings accounts at six withdrawals per month, most banks have removed that limit). Money market accounts usually pay higher interest because the withdrawal restriction makes them less costly for the bank to manage.

If you need to withdraw money frequently, a checking account is a better choice—it has no withdrawal limits and you can use it for everyday spending. If you rarely need to access your money and want the highest interest rate possible, a certificate of deposit (CD) may pay more than a money market account, though you cannot withdraw from a CD before its maturity date without paying a penalty.

When a money market account makes sense

A money market account works well if you have a lump sum of money you want to keep safe and earning interest, but you also want occasional access to it without moving to a different account. For example, if you have an emergency fund and you want it to earn more than a regular savings account but you do not need to touch it every week, a money market account splits the difference.

It also works if you want to separate your spending money from your savings. You could keep your checking account for bills and daily expenses, and your money market account for money you are saving toward a goal. The withdrawal limit naturally discourages you from dipping into savings on impulse.

A money market account does not make sense if you need to withdraw money more than six times a month, if you cannot meet the minimum balance requirement, or if you are looking for the absolute highest interest rate—a CD or high-yield savings account might serve you better depending on your timeline.

How to open a money market account

Opening a money market account is similar to opening any other bank account. You will need to provide your name, address, Social Security number, and a government-issued ID. You will also need to fund the account with at least the minimum opening deposit, which varies by bank but is often $2,500 or more.

You can open a money market account online, by phone, or in person at a bank branch. Online banks typically have lower minimum deposits and higher interest rates than brick-and-mortar banks, but you cannot deposit cash in person. If you prefer to handle banking in person or need to deposit cash regularly, a local or regional bank may be a better fit even if the interest rate is slightly lower.

Frequently Asked Questions

Can I use a money market account like a checking account?

Partially. You can write checks and use a debit card to withdraw money, so it functions like a checking account in that way. However, the monthly withdrawal limit means you cannot use it for all your everyday spending. Most people use a money market account for savings and a separate checking account for regular bills and purchases.

What happens if I exceed my withdrawal limit?

The bank will either decline the transaction or charge you a fee—usually $25 to $35 per excess withdrawal. Some banks may also lower your interest rate or convert the account to a checking account if you repeatedly exceed the limit. Check your bank's policy before opening the account.

Is my money safe in a money market account?

Yes, if the bank is FDIC-insured. The Federal Deposit Insurance Corporation protects deposits up to $250,000 per account holder per bank. Money market accounts at credit unions are protected by the National Credit Union Administration (NCUA) up to the same limit. Your money is not invested in the stock market—it stays in the bank.

Can the interest rate go down after I open the account?

Yes. Money market rates are variable, so the bank can lower your rate whenever it chooses. However, the bank must notify you before the rate changes. If rates drop significantly, you can close the account and move your money to a bank offering a better rate, though you should check for early closure fees first.

How is a money market account different from a money market fund?

A money market account is a bank deposit account protected by FDIC insurance. A money market fund is an investment product that is not insured and can lose value. They have similar names but work very differently. This article covers money market accounts only.