A money market account is a hybrid between a savings account and a checking account
A money market account is a bank account that combines features from two other types of accounts. Like a savings account, it earns interest on the money you keep in it. Like a checking account, it lets you withdraw your money and write checks or use a debit card — though usually with limits on how often you can do this each month.
The account gets its name because banks use the money you deposit to invest in short-term, low-risk loans and securities in the money market. You do not manage those investments yourself. The bank handles everything behind the scenes and pays you a portion of what it earns as interest.
Money market accounts are offered by banks and credit unions. They are insured by the Federal Deposit Insurance Corporation (FDIC) if held at a bank, or by the National Credit Union Administration (NCUA) if held at a credit union, which means your deposits are protected up to $250,000 if the institution fails.
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, though with monthly limits on withdrawals.
- The interest rate on a money market account is usually higher than a regular savings account but may be lower than a certificate of deposit (CD) for the same time period.
- Most money market accounts require a minimum opening deposit, which ranges from $1,000 to $25,000 depending on the bank.
- You can withdraw money whenever you need it, but federal rules limit certain types of withdrawals to six per month, and some banks charge a fee if you exceed that limit.
- Money market accounts are FDIC-insured at banks and NCUA-insured at credit unions, protecting your deposits up to $250,000.
How interest rates work on a money market account
The interest rate on a money market account is not fixed. It changes based on what the Federal Reserve does with its benchmark interest rate, which it adjusts several times a year. When the Fed raises rates, banks typically raise the rates they offer on money market accounts. When the Fed lowers rates, banks lower theirs.
The rate your bank offers also depends on how much money you have in the account. Many banks offer a tiered structure: if you keep $10,000 or more, you earn one rate; if you keep $50,000 or more, you earn a higher rate. This encourages you to keep larger balances in the account.
You can compare rates across different banks before opening an account. Online banks often offer higher rates than brick-and-mortar banks because they have lower overhead costs. The difference can be significant — one bank might offer 4.5% while another offers 2.0% on the same type of account.
Minimum deposits and account fees
Most money market accounts require you to deposit a minimum amount of money when you open the account. This minimum varies widely by bank and can range from $1,000 to $25,000. Some online banks have lower minimums, and some have none at all.
Beyond the opening deposit, banks may charge monthly maintenance fees, which typically range from $5 to $15 per month. However, many banks waive this fee if you maintain a certain balance — often $2,500 or higher. Some banks also charge a fee if you exceed the monthly withdrawal limit, usually $25 to $35 per excess withdrawal.
Before opening an account, read the fee schedule carefully. A high interest rate means little if you are paying $10 or $15 every month in fees. Calculate what you will actually earn after fees are subtracted.
Withdrawal limits and how they work
Federal rules historically limited you to six withdrawals per month from a money market account, though this rule was suspended during the pandemic and has not been fully reinstated. Currently, the limit depends on your bank's own policy. Some banks still enforce a six-withdrawal limit; others have removed it entirely.
The limit applies to certain types of withdrawals — typically transfers to another account and checks written against the account. Withdrawals made in person at a branch or through an ATM usually do not count toward the limit. This distinction matters if you plan to move money frequently.
If you exceed your bank's withdrawal limit, you may be charged a fee per excess withdrawal, or the bank may convert your account to a regular checking account. Ask your bank what happens before you open the account, especially if you think you will need to move money in and out regularly.
Money market accounts versus other savings options
A money market account sits between a regular savings account and a certificate of deposit (CD) in terms of flexibility and interest rate. A regular savings account offers lower interest but complete flexibility — you can withdraw money anytime without penalty. A CD locks your money away for a set period (three months to five years) in exchange for a higher interest rate.
A money market account offers a middle ground: higher interest than a savings account, but you can still access your money if you need it. The trade-off is the monthly withdrawal limit and the higher minimum deposit required to open one.
If you have money you will not need for several months and want the highest possible rate, a CD may be better. If you need complete flexibility and do not mind a lower rate, a regular savings account works. If you want a decent rate and occasional access to your money, a money market account fits the need.
How to open a money market account
Opening a money market account is similar to opening any other bank account. You can do it online, by phone, or in person at a branch. You will need to provide your Social Security number, a government-issued ID, and proof of your current address (usually a recent utility bill or lease).
The bank will run a background check through ChexSystems, a database that tracks banking history. If you have unpaid overdrafts or fraud issues at other banks, you may be denied. If you are approved, you will fund the account with your opening deposit, either by transferring money from another account or by mailing a check.
Once the account is open, you can begin earning interest when ready. The bank will send you a debit card and checks within one to two weeks. You can start making withdrawals as soon as the account is funded.
When a money market account makes sense for you
A money market account works well if you have a sum of money — perhaps $5,000 to $50,000 — that you want to earn interest on but might need to access within the next year or two. It is better than keeping that money in a regular savings account because the interest rate is higher.
It also makes sense if you want to keep some money separate from your checking account but do not want to lock it away in a CD. For example, you might use a money market account for an emergency fund or money you are saving for a down payment on a car or home.
A money market account is less useful if you need to move money in and out frequently, because of the withdrawal limits and potential fees. It is also less useful if you have a very small amount to deposit, because the minimum deposit requirement may be too high.
Frequently Asked Questions
Can I use a debit card to withdraw money from a money market account?
Yes, most banks issue a debit card with a money market account, and ATM withdrawals typically do not count toward your monthly withdrawal limit. However, check with your specific bank, because policies vary. Some banks may limit debit card use or charge a fee for frequent ATM withdrawals.
What happens if I fall below the minimum balance?
If your balance drops below the required minimum, your bank may charge a monthly fee until you bring it back up. Some banks will convert the account to a regular savings account. Read your account agreement to understand your bank's specific policy.
Is my money safe in a money market account?
Yes, money market accounts at banks are insured by the FDIC up to $250,000 per depositor per bank. If the bank fails, your money is protected. Credit union money market accounts are insured by the NCUA with the same $250,000 limit.
How often does the interest rate change?
Interest rates on money market accounts can change at any time, though banks typically adjust them after the Federal Reserve announces a rate change. Some banks change rates weekly or monthly based on market conditions. You will receive notice before a rate change takes effect.
Can I write checks from a money market account?
Most money market accounts come with a checkbook, and checks written from the account usually count toward your monthly withdrawal limit. Some banks limit the number of checks you can write per month or charge a fee for each check. Confirm this with your bank before opening the account.