A money market account is a hybrid — it has features of both, but works more like savings

A money market account sits between a regular savings account and a checking account. It earns interest like savings does, but it also lets you write checks and use a debit card like checking does. The catch is that you can only write a limited number of checks per month (often three to six), and you may face fees if you exceed that limit.

The reason banks structure them this way is that money market accounts require you to keep a higher minimum balance than a regular savings account — sometimes $2,500 or more, depending on the bank. In exchange for that larger balance, the bank pays you a higher interest rate. The checking features are a convenience for accessing your money without transferring it out first.

If you need to move money in and out constantly, a money market account will frustrate you. If you have a chunk of money you want to keep safe, earn interest on, and access occasionally, it works well.

Key Takeaways

  • A money market account earns interest like a savings account but lets you write checks and use a debit card like a checking account.
  • Most money market accounts limit you to three to six checks per month, and charge a fee if you go over that limit.
  • Banks require a higher minimum balance for money market accounts than for regular savings, often $2,500 or more.
  • Money market accounts work best for money you want to keep earning interest on while having occasional access, not for frequent transactions.

How the checking features actually work

When a money market account comes with check-writing, you get a checkbook and sometimes a debit card. You can write checks directly from the account and swipe the card at stores or online, just like you would with a checking account. The difference is the limit: most banks allow three to six checks per month before charging you a fee for each additional check.

Some banks count debit card transactions toward that limit, while others count only checks. Read your account agreement to know which applies to yours. A few banks don't count debit card use at all — they only limit checks — so the rules vary by institution.

If you regularly need to write more than six checks a month, a money market account will cost you money. A regular checking account, which has no check limit, would be cheaper.

The interest rate difference between money market and checking

A checking account typically earns little to no interest. A money market account earns noticeably more — the exact rate depends on the bank and the current economic environment, so rates change over time. The higher your balance, the higher the rate some banks offer.

That interest is why the account exists. If you keep $5,000 in a money market account earning 4% annually instead of a checking account earning 0%, you earn $200 per year on that money. Over five years, that adds up. The tradeoff is that you can't touch the money as freely.

Interest rates on money market accounts vary widely between banks. An online bank might offer a much higher rate than a brick-and-mortar bank. Before opening one, compare rates across several institutions.

Minimum balance requirements and fees

Money market accounts require you to maintain a minimum balance — the amount you must keep in the account at all times. If your balance drops below that minimum, the bank charges a monthly fee, usually $10 to $25. Some banks waive the fee if you set up automatic deposits or keep a linked savings account above a certain balance.

The minimum varies by bank. Some require $1,000, others $10,000 or more. Online banks often have lower minimums than traditional banks. If you don't have enough money to meet the minimum comfortably, a money market account isn't the right choice for you.

Beyond the minimum balance fee, money market accounts may charge you for exceeding your check limit, for overdrafts, or for closing the account early. Read the fee schedule before you open one.

When a money market account makes sense

A money market account works well if you have a sum of money — an emergency fund, a down payment you're saving for, or a bonus you received — that you want to earn interest on while keeping it accessible. You're not touching it every week, but you might need it in a few months.

It also works if you write checks occasionally but not constantly. If you write two checks a month and use your debit card for most purchases, you'll stay within the limit and earn interest at the same time.

A money market account does not work well if you need to write many checks, make frequent transfers, or access your money constantly. A regular checking account is cheaper and simpler for that purpose.

Money market accounts versus money market funds

Do not confuse a money market account with a money market fund. They have similar names but work very differently. A money market account is a bank account insured by the FDIC (Federal Deposit Insurance Corporation), which means your money is protected up to $250,000 if the bank fails. A money market fund is an investment product sold through a brokerage, not insured by the FDIC, and its value can go down.

A money market account is safer and simpler. A money market fund may offer a slightly higher return but carries investment risk. For someone new to banking, a money market account is the better choice.

How to compare money market accounts across banks

When shopping for a money market account, look at three things: the interest rate, the minimum balance requirement, and the fee structure. A bank advertising a high rate but requiring a $25,000 minimum may not be better than one with a lower rate and a $2,500 minimum, depending on how much money you have.

Check whether the bank counts debit card transactions toward your check limit. Some banks are more generous than others. Also ask whether the minimum balance requirement is a daily balance (you must maintain it every single day) or an average balance (you can dip below it as long as your average over the month stays above it). An average balance requirement is easier to meet.

Online banks often offer higher rates than traditional banks because they have lower overhead costs. If you're comfortable banking online and don't need to visit a physical branch, an online bank's money market account may give you more interest for the same minimum balance.

Frequently Asked Questions

Can I use my money market account debit card as much as I want?

Yes. Most banks limit only checks, not debit card transactions. You can use the debit card as often as you need. However, some banks count both checks and debit card swipes toward the same limit, so confirm your bank's policy before opening the account.

What happens if I fall below the minimum balance?

The bank charges you a monthly fee, usually $10 to $25. The fee continues each month until your balance rises back above the minimum. Some banks waive the fee if you bring the balance back up within a certain number of days.

Is my money safe in a money market account?

Yes, if the bank is FDIC-insured. The FDIC protects up to $250,000 per account holder per bank. If the bank fails, you get your money back. Check the bank's website or call to confirm it carries FDIC insurance.

Can I move money out of a money market account whenever I want?

You can write checks or use the debit card to access your money. You can also transfer money to another account, though some banks limit the number of transfers per month. Check your account agreement for transfer limits.

Should I open a money market account or a regular savings account?

Open a money market account if you have enough money to meet the minimum balance and want a higher interest rate. Open a regular savings account if you have less money or want more flexibility without minimum balance requirements. Both are safer than keeping cash at home.