A money market account is a savings account, but with different rules

Yes, a money market account is technically a type of savings account. Both hold money you are not spending right now, and both earn interest. But they work differently in ways that matter to you — especially if you need to get your money out quickly or want to make lots of withdrawals.

The main difference is how often you can withdraw. A regular savings account lets you take money out whenever you want. A money market account usually limits you to a certain number of withdrawals per month (often six), and may charge you a fee if you go over that limit. In exchange, money market accounts typically pay higher interest rates than regular savings accounts.

Think of it this way: a regular savings account is for money you might need soon. A money market account is for money you want to grow but can probably leave alone for a while.

Key Takeaways

  • Money market accounts are savings accounts, but they limit how many times per month you can withdraw money, usually to six withdrawals.
  • Money market accounts pay higher interest rates than regular savings accounts because the bank can count on keeping your money longer.
  • Both are insured by the FDIC up to $250,000, so your money is protected the same way at either type of account.
  • If you need to withdraw money more than six times a month, a regular savings account is a better fit than a money market account.

Why money market accounts pay more interest

Banks pay higher interest on money market accounts because they know the money will stay put. When you agree to limit your withdrawals, the bank can lend that money out with more confidence. They do not have to keep as much cash on hand waiting for you to ask for it.

The difference in interest rate varies by bank and by how much money you have in the account. Some banks pay only slightly more on a money market account than a regular savings account. Others pay noticeably more — sometimes double or triple the rate. It is worth comparing what your bank offers before you decide.

The catch is that you have to follow the withdrawal rules to get that higher rate. If you break the limit regularly, the bank may charge you fees that eat into the extra interest you earned.

The withdrawal limits that come with money market accounts

Most banks limit you to six withdrawals per month from a money market account. Some allow fewer, some allow more. The limit usually applies to transfers and checks written from the account, not to deposits — you can put money in as often as you want.

If you go over the limit, the bank charges a fee for each extra withdrawal. That fee is usually between $10 and $25 per transaction. Some banks will close your account if you repeatedly exceed the limit.

This is different from a regular savings account, where you can withdraw as many times as you want without penalty. If you think you will need to take money out more than six times a month, a money market account is not the right choice for you.

How FDIC insurance works the same way for both

Both regular savings accounts and money market accounts are protected by FDIC insurance up to $250,000 per account holder per bank. This means if the bank fails, the government guarantees you will get your money back up to that limit.

The insurance works exactly the same way for both types of accounts. You do not get more protection with a money market account, and you do not get less. The only difference is the interest rate and the withdrawal rules.

When to choose a money market account over a regular savings account

A money market account makes sense if you have money you want to save for several months or longer and you do not expect to need it often. For example, if you are saving for a down payment on a car that you plan to buy in a year, a money market account could earn you more interest than a regular savings account.

It also makes sense if you want to keep an emergency fund separate from your checking account and you do not mind the withdrawal limit. Since you are not supposed to touch an emergency fund except for actual emergencies, the six-withdrawal limit is not really a problem.

A regular savings account is better if you are saving for something you might need sooner, or if you like having the freedom to withdraw money whenever you want without worrying about limits or fees.

The difference between money market accounts and money market funds

Do not confuse a money market account (which is a bank account) with a money market fund (which is an investment). They have similar names, but they work very differently.

A money market account is a bank product. Your money is insured by the FDIC, and you can withdraw it without losing anything. A money market fund is sold by investment companies and is not FDIC insured. The value can go up or down, and you could lose money if you need to withdraw when the value is down.

If someone at a bank is talking to you about a money market account, they are talking about a savings product. If someone at an investment firm is talking about a money market fund, that is a different thing entirely.

Frequently Asked Questions

Can I move money between my checking account and money market account as many times as I want?

No. The six-withdrawal limit (or whatever limit your bank sets) includes transfers to your checking account. Each time you move money out, it counts toward your limit. Deposits into the account do not count.

What happens if I exceed the withdrawal limit?

Your bank will charge you a fee for each withdrawal over the limit, usually $10 to $25 per transaction. If you do this repeatedly, the bank may downgrade your account to a regular savings account or close it entirely.

Is my money safer in a money market account than a regular savings account?

No. Both are insured by the FDIC up to $250,000. Your money is equally protected either way. The only difference is the interest rate and withdrawal rules.

Can I write checks from a money market account?

Many banks allow you to write checks from a money market account, but each check counts as a withdrawal toward your monthly limit. Some banks do not allow checks at all. Ask your bank what their policy is before you open the account.

Should I move my savings to a money market account to earn more interest?

Only if you do not need to withdraw the money often. If you think you will need to take money out more than six times a month, the fees will outweigh the extra interest. Compare the interest rate difference at your bank to decide if it is worth the restriction.