Money Market Account

Money market account summary:

• Many big banks and online banks offer a money market account. 

• Money market accounts typically pay interest rates slightly higher than many savings accounts. 

• Money market accounts come with checks or a debit card, so you can directly access the money in the account. 

Money market account definition and meaning 

If you’re looking for a new bank account, checking and savings aren’t the only options. You could open a money market account at a bank or a credit union. Like a checking account, these deposit accounts give you easy access to your money. And like a savings account, they pay interes—typically a bit higher than savings accounts pay. 

Key concept: A money market account could be the right fit if you want to earn interest on your saved cash while still being able to withdraw it as needed. 

More about money market accounts

A money market account could make sense in the following situations:

• You’re saving for a short-term goal in the next 12 months (a home purchase or a vacation) 

• You know you’ll need to access your money periodically, for instance, paying a home inspector or booking plane tickets

An MMA might also be a good place to keep your emergency fund. The money will be separate from your regular checking account, so you can’t accidentally spend it. The money will earn interest. And if you have an unplanned bill pop up (as they always do), you can easily pay it without needing to first transfer money from a savings account to a checking account. 

Key features of money market accounts 

Money market accounts have a few features worth knowing about. 

Money market accounts are FDIC- or NCUA-insured 

Just like your checking and savings accounts, MMAs come with Federal Deposit Insurance Corporation (FDIC)  protection. (or NCUA insurance, if your account is at a credit union, it has similar protections from the National Credit Union Administration. Up to $250,000 of your money in the account (or $500,000 if you co-own the account with another person) is protected in case of bank failure. 

They pay interest on your money 

High-yield savings accounts are paying upward of 3% APY these days. A good money market account will pay a similar interest rate, especially if you open one offered by an online bank. 

Checks or debit cards 

When you open a money market account, you’ll be given paper checks or a debit card so you can access your money at an ATM or by using the card to spend directly. Banks and credit unions offer a range of account features, so compare the available accounts to ensure the money market account you choose has the type of cash access you want. 

Limited transactions

It might be easy to withdraw the money in your MMA by whipping out a debit card or writing a check, but you won’t have the same unfettered access that a checking account gives you. Money market accounts limit withdrawals to a set number per statement period, often just six withdrawals a month. 

Fees

Money market accounts may charge monthly maintenance fees if you don’t maintain a minimum balance in the account. Banks have varying specifics, but $2,500 is a common minimum balance requirement. Some banks have a minimum deposit to open your account. Some banks offer relatively fee-free accounts, and don’t charge for overdrafts, ACH transfers, incoming wire transfers, and cashier’s checks. You may even be able to avoid excessive transaction fees at some online banks.