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

A money market account (sometimes called an MMA) combines features of two different account types. Like a savings account, it earns interest on the money you deposit. Like a checking account, it lets you write checks or use a debit card to withdraw funds. 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 account sits in a middle ground because banks use the money you deposit to make loans and investments. In return, they pay you interest. The interest rate on a money market account is typically higher than what you'd earn in a basic savings account, but lower than what you might earn in a certificate of deposit (CD), where your money stays locked away for a set period.

Money market accounts are FDIC-insured at most banks, meaning your deposits up to $250,000 are protected if the bank fails. This makes them safer than keeping cash at home, but they're not investment accounts—you won't own stocks or bonds through an MMA.

Key Takeaways

  • A money market account earns interest like a savings account but allows limited check-writing and debit card access like a checking account.
  • Banks restrict withdrawals to a set number per month (often six), and exceeding that limit triggers a fee or account closure.
  • The interest rate varies by bank and economic conditions, so comparing rates across institutions can significantly affect your earnings.
  • Money market accounts require a higher minimum deposit than most savings accounts, typically between $500 and $2,500 depending on the bank.
  • Fees for overdrafts, low balance maintenance, or excess withdrawals can reduce or eliminate the interest you earn.

How the withdrawal limit works in practice

Federal rules once capped withdrawals at six per month, but that restriction was lifted in 2020. However, individual banks still set their own limits, and many still enforce a six-withdrawal cap. Some banks allow unlimited withdrawals, while others permit ten or twelve. The specific number depends on which bank you choose and which account tier you open.

When you exceed the limit, the bank charges a fee—usually $10 to $25 per excess withdrawal. Some banks close the account after repeated violations. This is why money market accounts work best for people who need occasional access to their money but don't plan to withdraw frequently. If you're moving money in and out multiple times a week, a regular checking account is a better fit.

The withdrawal limit applies to transfers and checks, but not always to ATM withdrawals or debit card purchases. Rules vary by bank, so you need to check your specific account agreement to know what counts toward your limit.

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 rates based on the federal funds rate—the interest rate the Federal Reserve charges banks to lend to each other. When the Fed raises rates, banks typically raise the rates they pay on savings and money market accounts. When the Fed lowers rates, banks lower what they pay you.

The rate you receive also depends on your bank's competition and how much money you have in the account. Some banks offer higher rates to customers with larger balances. Online banks often pay higher rates than brick-and-mortar banks because they have lower overhead costs. Comparing rates across five or six banks before opening an account can mean earning an extra $50 to $200 per year on the same deposit.

Your bank must notify you before changing your rate, but they can change it without your permission. This is different from a CD, where your rate is locked in for the full term.

Minimum deposits and account tiers

Most banks require an opening deposit of $500 to $2,500 to open a money market account. Some require $10,000 or more. A few online banks have no minimum, but they may pay lower interest rates. Once the account is open, many banks require you to maintain a minimum balance—often the same amount as the opening deposit. If your balance falls below that threshold, you may face a monthly fee of $5 to $15.

Some banks offer tiered money market accounts, where the interest rate increases as your balance grows. For example, you might earn 4.50% on balances up to $25,000, then 4.75% on balances above that. This rewards customers who keep larger amounts in the account, but it also means the rate structure is more complex to compare across banks.

Fees that reduce your earnings

The interest you earn can be eaten away by fees. Common charges include overdraft fees (usually $25 to $35 if you withdraw more than your balance), monthly maintenance fees ($5 to $15 if your balance is too low), excess withdrawal fees ($10 to $25 per withdrawal over the limit), and inactivity fees (charged if you don't use the account for a set period, typically six months to a year).

Some banks waive certain fees if you meet conditions—for example, no monthly fee if you maintain a $1,000 balance or set up direct deposit. Reading the fee schedule before opening an account is essential. A bank offering 4.75% interest but charging a $10 monthly maintenance fee is actually paying you less than a bank offering 4.50% with no fees.

Money market accounts versus other savings options

A money market account sits between a regular savings account and a certificate of deposit. A savings account has no withdrawal limits and lower minimum deposits, but pays less interest. A CD locks your money away for three months to five years and pays more interest, but charges a penalty if you withdraw early. A money market account offers middle-ground interest rates and partial access to your money, making it useful if you want to earn more than a savings account but need occasional withdrawals.

A checking account has unlimited withdrawals and check-writing but pays little or no interest. Some banks offer high-yield checking accounts that pay competitive interest rates, but these usually require direct deposit or a minimum number of debit card transactions per month. A money market account doesn't have those conditions—you just need to keep the minimum balance and respect the withdrawal limit.

Who should consider a money market account

Money market accounts work well for people saving for a specific goal—a car, a home down payment, or a vacation—where they want to earn interest but might need to access the money within a few years. They're also useful as a bridge account: you can keep your emergency fund in a money market account earning higher interest than a savings account, then move it to a checking account when you need to spend it.

They're less useful if you need to withdraw money frequently, if you can't meet the minimum deposit, or if you're saving for the very long term (in which case a CD or investment account might make more sense). If you have a small balance—under $500—the interest you earn will be minimal, and fees could wipe out your gains entirely.

Frequently Asked Questions

Can I write checks from a money market account?

Yes, most money market accounts come with check-writing privileges, but the number of checks you can write per month is usually limited to the same withdrawal cap—often six. Each check counts as one withdrawal. Some banks allow unlimited check-writing but restrict other types of withdrawals instead.

What happens if I go over the withdrawal limit?

The bank charges a fee, typically $10 to $25 per excess withdrawal. If you repeatedly exceed the limit, some banks will close the account or convert it to a regular savings account. The specific consequences depend on your bank's policy.

Is my money safe in a money market account?

Yes, at FDIC-insured banks, deposits up to $250,000 are protected if the bank fails. Money market accounts are not investments, so you won't lose money due to market downturns. Your balance can only go down if you withdraw it or if fees reduce it.

Do I pay taxes on money market account interest?

Yes. The interest you earn is taxable income. Your bank will send you a 1099-INT form at the end of the year if you earned $10 or more in interest, and you'll report that amount on your tax return.

Can I move money between my money market account and checking account without limit?

Transfers between your own accounts at the same bank usually don't count toward the withdrawal limit, but this varies by bank. Transfers to accounts at other banks typically do count. Check your account agreement or call the bank to confirm.