A money market account is a hybrid savings product that combines features of a checking account and a savings account

A money market account (MMA) is a deposit account offered by banks and credit unions. It pays interest on your balance, like a savings account does. It also lets you write checks or use a debit card to withdraw money, like a checking account does. The tradeoff is that the bank limits how many withdrawals you can make each month—typically six—and often requires a higher opening deposit than a regular savings account.

Money market accounts are FDIC-insured at banks and NCUA-insured at credit unions, up to $250,000 per depositor per institution. That means your money is protected if the bank fails. The interest rate on a money market account is variable, meaning the bank can change it whenever it wants. Rates tend to move with the Federal Reserve's interest rate decisions, so they rise when the Fed raises rates and fall when it cuts them.

Key Takeaways

  • Money market accounts pay interest and allow limited check-writing or debit card access, making them useful for money you need occasionally but want to earn interest on.
  • Banks typically limit withdrawals to six per month and require a higher minimum deposit—often $2,500 to $10,000—than regular savings accounts.
  • Interest rates on money market accounts are variable and can change at any time, so the rate you open with may not be the rate you earn a year from now.
  • Your deposits are insured up to $250,000 by the FDIC (at banks) or NCUA (at credit unions), protecting your principal if the institution fails.

How the withdrawal limit works in practice

The six-withdrawal limit per month applies to transfers and withdrawals initiated by phone, online, or mail. Withdrawals at an ATM or in person at a branch do not count toward this limit. So if you need cash regularly, you can visit a branch or ATM as often as you want. The limit exists to discourage people from using money market accounts as everyday checking accounts.

If you exceed the six withdrawals in a month, the bank may charge a fee—usually $10 to $25 per excess withdrawal—or convert your account to a regular savings account. Some banks will simply refuse the withdrawal. The specific penalty depends on the bank's terms, so read the account agreement before you open one.

Interest rates and how they compare to other accounts

Money market account rates vary widely by bank and change frequently. At any given time, some online banks offer rates significantly higher than brick-and-mortar banks. The difference can be 0.5% to 1.5% or more, depending on the Fed's current rate environment. Because rates are variable, a high rate today does not may provide a high rate next month.

Money market accounts typically pay more than regular savings accounts at the same bank, but less than a certificate of deposit (CD) with the same term. A CD locks your money away for a fixed period—say, one year—in exchange for a may provide rate. A money market account gives you access to your money, so the bank pays less for that flexibility. High-yield savings accounts, which are also offered by online banks, often pay rates comparable to money market accounts but without the withdrawal limit.

Minimum deposits and account fees

Most banks require an opening deposit of $2,500 to $10,000 to open a money market account. Some online banks have lower minimums, and some require no minimum at all. If your balance falls below the minimum, the bank may charge a monthly fee—often $10 to $25—or close the account.

Beyond the minimum-balance fee, money market accounts may charge monthly maintenance fees, excess withdrawal fees, or fees for falling below a certain balance at any point during the month. Some banks waive fees if you maintain a higher balance or have other accounts with them. Compare the fee structure across banks before opening an account, because fees can erase a significant portion of your interest earnings.

Who should use a money market account

A money market account makes sense if you have money you want to earn interest on but may need to access within a few months or a year. Examples include an emergency fund, money set aside for a down payment, or funds you are saving for a large purchase. The interest rate is higher than a regular savings account, and you have some access to your money without penalty.

A money market account is not ideal if you need to make frequent withdrawals—more than six per month—because you will hit the withdrawal limit and face fees. It is also not the best choice if you want to lock in a may provide rate for a specific period; a CD does that better. And if you want the highest possible interest rate with no withdrawal limits, a high-yield savings account may serve you better.

Money market accounts versus money market funds

Do not confuse a money market account with a money market fund. They have similar names but are completely different products. A money market account is a bank deposit account insured by the FDIC or NCUA. A money market fund is an investment product sold by brokerages and mutual fund companies. It invests your money in short-term debt securities like Treasury bills and commercial paper, and it is not insured by the FDIC.

Money market funds are not bank accounts. They do not earn interest in the traditional sense; instead, they generate returns based on the performance of the underlying securities. They carry investment risk, meaning you could lose money. They are useful for investors who want a low-risk place to park cash temporarily, but they are not a substitute for a bank savings product.

How to open a money market account

Opening a money market account is straightforward. Visit a bank or credit union's website or branch, find the money market account product, and follow the application process. You will need to provide your name, address, Social Security number, and employment information. The bank will verify your identity and check your banking history using ChexSystems or a similar service.

Once approved, you fund the account with your opening deposit. You can transfer money from another account at the same bank, wire funds from another bank, or deposit a check. After that, you can begin earning interest immediately. The bank will send you a debit card and checks (if the account includes check-writing), and you can start making withdrawals within the limits of your account agreement.

Frequently Asked Questions

Can I lose money in a money market account?

No. Your principal is insured up to $250,000 by the FDIC (at banks) or NCUA (at credit unions). You will not lose your deposit if the bank fails. However, if interest rates fall, the rate you earn will fall too, so your interest income may shrink.

What happens if I exceed the six withdrawals in a month?

The bank may charge a fee per excess withdrawal, typically $10 to $25, or convert your account to a regular savings account. Some banks refuse the withdrawal outright. Check your account agreement to see what your bank does. ATM and in-person withdrawals do not count toward the limit.

Is a money market account better than a savings account?

A money market account usually pays more interest than a regular savings account at the same bank, but it requires a higher minimum deposit and limits your withdrawals. If you need frequent access to your money, a regular savings account may be simpler. If you want the highest rate with no withdrawal limits, a high-yield savings account may be better.

Can the bank change the interest rate whenever it wants?

Yes. Money market account rates are variable, so the bank can raise or lower your rate at any time. The bank must notify you before making a change, usually by email or mail. If you disagree with a rate cut, you can withdraw your money and move it elsewhere without penalty.

Do I need a minimum balance to keep earning interest?

That depends on the bank. Some banks pay interest on any balance, no matter how small. Others require you to maintain a minimum balance—often $2,500 or more—to earn the advertised rate. If your balance falls below the minimum, the bank may pay a lower rate or charge a fee. Read the account terms before opening.