Definition and Benefits of a Money Market Account

What is a money market account? A money market account is a savings account with some checking features. They typically come with checks or a debit card and allow a limited number of transactions each month. Traditionally, they’ve also offered higher interest rates than regular savings accounts.

But these days, their rates are similar. And money markets often have higher minimum deposit or balance requirements than savings accounts, so compare your options before picking a money market.

Money market accounts are insured by the Federal Deposit Insurance Corp. (at banks) and the National Credit Union Administration (at credit unions), so you won’t lose your deposits even if your financial institution goes out of business.

Pros and cons of money market accounts

So many people often ask if the account is worth it? That depends. If you’re considering one, keep these pluses and minuses in mind.

Pros

• Receive some of your bank’s best rates.
• Access funds more easily than with most savings accounts, which might be helpful in an emergency.
• Have a safe place to keep a large chunk of money, protected by FDIC insurance.

Cons

• Funds might be too easy to spend.
• Some accounts require high minimum balances to open or avoid fees.
• In many cases, savings accounts pay just as much interest.

If your bank pays similar rates on its standard savings account and its money market, it might be worth sticking with the savings account. You’re more likely to avoid high minimum balance requirements, and both accounts are insured. But if the money market’s rate is higher and you can afford the minimum, it’s generally a good idea to sign up.

Read Also: The Beginner’s Guide to Personal Finance & How To Manage Money

How to choose a money market account

If you decide a money market account is your best option, look for one with a high interest rate and no monthly fee. It also should have a reasonable minimum balance. Some institutions require $10,000 or more to open an account.“

Look for a money market account with the best rates and no monthly fees. It also should have a reasonable minimum balance.

Compare a wider range of accounts by entering your ZIP code and a minimum deposit to get the best money market rates.

Money market accounts vs. other accounts

Money market accounts have features that overlap those of other bank accounts, but there are important differences. Consider how they compare to other savings accounts:

Type of account	How is the interest rate?	Why open this account?
Money market account	Competitive with savings account rates	May pay a better interest rate than a regular savings account. Typically offers the ability to write checks or make debit card purchases on the account (up to 6 times a month without penalty).
Savings account	Competitive with money market account rates	Interest rates can be similar to those of a money market account. Usually requires a lower minimum opening deposit and lower balance requirements than a money market.
Certificates of deposit (CDs)	Generally highest of all bank accounts	You have a chunk of money you won’t need for months or years. You want higher interest rates, without the risk of investing in the equity markets. (Learn more about how timing and risk tolerance should determine where you put your money.)

Money market accounts also have crucial differences from other types of bank accounts:

• A money market account is not a money market fund, an investment that could lose value if the market falls. Money market accounts are backed by the FDIC or NCUA, up to $250,000 per depositor.
• A money market account is not a checking account. Some money market accounts have check-writing and debit card features. But, as with regular savings accounts, they are limited by the Federal Reserve to six “convenient” transfers or withdrawals a month — including by check, debit card swipe or online transfer. If you want the ability to write checks and make frequent withdrawals, you may be better off opening an interest-bearing checking account. (You can look for high-interest accounts by entering your ZIP code and minimum deposit in our interest checking tool.)

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