A money market account is technically a type of savings account, but with stricter rules about how often you can withdraw

A money market account is a savings account in the legal sense — both are deposit accounts at a bank or credit union, both earn interest, and both are FDIC-insured up to $250,000. The practical difference is in the restrictions. A savings account lets you withdraw money whenever you want with no penalty. A money market account usually limits you to six withdrawals per month, and many require a higher minimum balance to open or maintain. In return, money market accounts typically pay higher interest rates than regular savings accounts.

Think of it this way: if you need to move money in and out frequently, a regular savings account is simpler and has no restrictions. If you're setting money aside and won't touch it often, a money market account can pay you more for leaving it alone.

Key Takeaways

  • Both money market accounts and savings accounts are FDIC-insured deposit accounts that earn interest, but money market accounts usually pay higher rates.
  • Money market accounts typically limit you to six withdrawals per month, while savings accounts have no withdrawal limit.
  • Money market accounts often require a higher opening balance — sometimes $2,500 to $25,000 — compared to savings accounts.
  • If you exceed the withdrawal limit on a money market account, the bank may charge a fee per excess withdrawal, convert the account to checking, or close it.

How withdrawal limits actually work

Federal rules once capped savings account withdrawals at six per month, but that rule was suspended in 2020 and has not been reinstated. Most banks now allow unlimited withdrawals from savings accounts. Money market accounts, however, still typically enforce a six-withdrawal limit — and banks define "withdrawal" broadly. A withdrawal includes an ATM withdrawal, a check you write, a transfer to another account, or a debit card transaction.

The limit applies to outgoing money only. You can deposit as much as you want without counting against the limit. Some banks count only certain types of withdrawals — for example, they might limit checks and transfers but not ATM withdrawals. Read your account agreement to know what counts at your specific bank. If you go over the limit, the bank may charge a fee per excess withdrawal (usually $10 to $25), or they may freeze the account, convert it to a checking account, or close it entirely. The consequences vary by bank, so ask before you open the account.

Interest rates and minimum balances

Money market accounts pay higher interest than savings accounts because you're agreeing to keep the money there and not touch it often. The exact rate depends on the bank and the current economic environment — rates change frequently and vary widely. Some banks currently pay 4% to 5% on money market accounts, while others pay less than 1%. Savings accounts at the same bank usually pay 0.5% to 2% less.

The tradeoff is the minimum balance. A savings account might require $0 to open, while a money market account at the same bank might require $2,500, $10,000, or even $25,000. If your balance drops below the minimum, the bank may charge a monthly fee or stop paying the higher interest rate. Some banks waive the minimum if you set up automatic deposits or link the account to direct deposit, so ask about those options when you compare accounts.

When a money market account makes sense

A money market account works well if you have money you want to set aside for a specific goal — an emergency fund, a down payment you're saving for, or money you won't need for several months. The higher interest rate means your money grows faster than it would in a savings account, and the withdrawal limit keeps you from dipping into it on impulse.

A money market account does not work well if you need to move money frequently, if you have less than the minimum balance the bank requires, or if you're not sure you can stay under the withdrawal limit. In those cases, a regular savings account is simpler and has no penalties or restrictions.

Money market accounts vs. money market funds

Do not confuse a money market account with a money market fund. A money market account is a bank deposit account — your money is FDIC-insured up to $250,000. A money market fund is an investment product sold by brokerage firms — it is not FDIC-insured, though it is generally considered low-risk. Money market funds can offer higher returns but carry more risk and have different tax treatment than deposit accounts.

If your bank is offering a "money market account," it is the deposit account, not the fund. The name is similar, but they work differently and carry different protections. Ask the bank directly whether you're opening a deposit account or an investment product.

How to compare money market accounts

When you're looking at money market accounts, compare these four things: the interest rate, the minimum balance, the withdrawal limit, and the fees. A bank advertising a high rate might require a $25,000 minimum, while another bank with a slightly lower rate might only require $2,500. The higher rate is only valuable if you can meet the minimum without hardship.

Ask the bank directly what happens if you exceed the withdrawal limit, what counts as a withdrawal, and whether the rate is fixed or variable. Some banks lower the rate if your balance drops below a certain threshold, so understand the full picture before you open the account. Online banks and credit unions often offer higher rates than brick-and-mortar banks, so check a few options before deciding.

Frequently Asked Questions

Can I write checks from a money market account?

Some money market accounts come with check-writing privileges, but not all. If they do, checks usually count toward your six-withdrawal limit. Ask the bank whether checks are included in the limit before you open the account.

What happens if I need to withdraw more than six times in a month?

The bank will charge a fee for each excess withdrawal, usually $10 to $25 per transaction. If you repeatedly exceed the limit, the bank may close the account or convert it to a checking account. If you know you'll need frequent access, a savings account is a better fit.

Is a money market account safer than a savings account?

Both are equally safe if they're at an FDIC-insured bank. Your deposits are protected up to $250,000 at each bank. The difference is not safety — it's how much interest you earn and how often you can withdraw.

Can I move money from a money market account to a checking account without it counting as a withdrawal?

A transfer to another account at the same bank counts as a withdrawal and counts toward your limit. Some banks allow unlimited transfers to your own checking account at the same institution, so ask before you open the account.

Do I pay taxes on money market account interest?

Yes. Interest earned on a money market account is taxable income. The bank will send you a 1099-INT form at the end of the year showing how much interest you earned, and you'll report that on your tax return.