A money market account is a hybrid between a savings account and a checking account, held at a bank or credit union
Money market accounts combine features you recognize from both places. Like a savings account, they earn interest on your balance. Like a checking account, they let you write checks or make transfers to move money out. The tradeoff is that banks limit how many withdrawals you can make each month — typically six — and they require a higher opening deposit than a regular savings account, often $2,500 to $10,000 depending on the institution.
The money you deposit is insured by the Federal Deposit Insurance Corporation (FDIC) at banks or by the National Credit Union Administration (NCUA) at credit unions, up to $250,000 per account holder per institution. That means if the bank fails, your money is protected.
Interest rates on money market accounts fluctuate with the Federal Reserve's rate decisions. When the Fed raises rates, banks raise the rates they pay on money market accounts. When the Fed cuts rates, those rates fall. You earn interest on your full balance, and that interest compounds — meaning you earn interest on the interest you've already earned.
Key Takeaways
- Money market accounts earn interest like savings accounts but allow limited check-writing and transfers like checking accounts.
- Banks restrict withdrawals to six per month, and exceeding this limit may result in fees or account closure.
- Your deposit is FDIC or NCUA insured up to $250,000, protecting your money if the institution fails.
- Interest rates change with Federal Reserve decisions and vary by bank, so comparing rates across institutions matters.
- You access your money through checks, debit cards, transfers, or ATM withdrawals, depending on what the bank offers.
How deposits and withdrawals work
You open a money market account the same way you open any bank account: in person, online, or by phone. You provide identification, Social Security number, and initial deposit. Some banks require the deposit to clear before you can make withdrawals; others let you access funds immediately.
Once the account is open, you can deposit money by direct deposit from your employer, by transferring funds from another account at the same bank, by mailing a check, or by depositing cash at a branch. Some banks accept mobile check deposit through their app.
Withdrawals work differently depending on the bank. Most money market accounts come with a debit card, so you can withdraw cash at ATMs. Many also let you write checks directly from the account. Some banks offer a limited number of checks per month as part of the account terms. You can also transfer money out to another account at the same bank or to an external account, though external transfers may take one to three business days.
The six-withdrawal limit applies to most transfers and checks, but not to ATM withdrawals or in-person withdrawals at a branch. If you exceed the limit in a month, the bank may charge a fee (typically $10 to $25 per excess transaction) or convert your account to a regular savings account with lower interest.
Interest rates and how they're calculated
Money market accounts pay interest as an annual percentage yield (APY). This rate tells you what percentage of your balance you'll earn in a year, accounting for compounding. A $10,000 balance at 4.50% APY earns roughly $450 in a year, though the actual amount depends on how often the bank compounds interest (daily, monthly, or quarterly).
Banks set their own rates within the constraints of what the Federal Reserve does. When the Fed raises its benchmark rate, banks typically raise money market rates within days or weeks. When the Fed cuts rates, banks cut money market rates, though sometimes more slowly. Rates vary significantly between banks — one bank might offer 4.75% APY while another offers 3.50% on the same day. Online banks tend to offer higher rates than brick-and-mortar banks because they have lower overhead costs.
Interest accrues daily but is usually credited to your account monthly. That means the bank calculates how much interest you've earned each day, adds it all up at the end of the month, and deposits the total into your account. From that point forward, you earn interest on the interest — that's compounding.
Fees and minimum balance requirements
Money market accounts come with several potential fees. A monthly maintenance fee (typically $5 to $15) is charged if your balance falls below the minimum, which ranges from $1,000 to $25,000 depending on the bank. An excess withdrawal fee ($10 to $25 per transaction) applies when you exceed the six-withdrawal limit. Some banks charge a fee to close the account if you do so within a certain period, often 90 days to one year.
Overdraft fees apply if you write a check or make a transfer for more than your balance. These fees typically range from $25 to $35 per overdraft. Some banks offer overdraft protection, which links your money market account to a checking account or credit line so that if you overdraw, funds transfer automatically from the linked account instead of triggering a fee.
To avoid fees, keep your balance above the minimum, limit your withdrawals to six per month, and monitor your account balance before writing checks or making transfers. Many banks waive the monthly maintenance fee if you maintain a certain balance or set up direct deposit.
Money market accounts versus savings and checking accounts
A regular savings account earns interest but offers no check-writing or debit card access. You move money out by transferring it to another account or withdrawing cash at a branch or ATM. A checking account offers unlimited transactions and a debit card but earns little to no interest. A money market account splits the difference: it earns interest like savings but lets you access money like checking, with the tradeoff of a six-withdrawal limit.
Money market accounts also require a higher opening deposit than most savings accounts. If you have less than $2,500 to deposit, a regular savings account may be your only option. If you need to make more than six withdrawals per month, a checking account is more practical, even if it earns no interest.
Some people use a money market account as their primary account and a checking account as a secondary account for frequent transactions. Others use a money market account as a place to park money they don't need immediate access to, because the interest rate is higher than a savings account.
What happens if you exceed the withdrawal limit
The six-withdrawal limit is a federal regulation that applies to most savings and money market accounts at banks and credit unions. It includes checks written, transfers to other accounts, and automatic bill payments — but not ATM withdrawals or in-person withdrawals at a branch.
If you exceed the limit, the bank charges a fee for each excess transaction, usually $10 to $25. If you repeatedly exceed the limit, the bank may close the account or convert it to a regular savings account with a lower interest rate. Some banks enforce the limit strictly; others are more lenient, especially if you're a long-standing customer.
To stay within the limit, track your withdrawals each month. If you know you'll need to make more than six withdrawals, consider opening a checking account for frequent transactions and using the money market account for money you're saving.
How to choose a money market account
Compare rates across banks before opening an account. Online banks typically offer higher APY than traditional banks. Check the current rate on the bank's website — rates change frequently and vary by institution. A difference of 1% APY on a $10,000 balance means $100 more per year.
Look at the minimum opening deposit and minimum balance requirement. If you have $1,000 to deposit, you may not meet the minimum at some banks. Check whether the bank waives the monthly fee if you maintain a certain balance or set up direct deposit.
Review the withdrawal options. Does the bank offer a debit card? Can you write checks? Are there ATMs you can use without paying a fee? Some banks charge out-of-network ATM fees; others reimburse them. If you travel or live far from a branch, online access and ATM availability matter.
Confirm that the bank is FDIC-insured (for banks) or NCUA-insured (for credit unions). This protects your deposit up to $250,000 if the institution fails. You can verify FDIC insurance on the FDIC's website by searching the bank's name.
Frequently Asked Questions
Can I use a money market account as my main checking account?
Technically yes, but it's not practical if you make more than six withdrawals per month. The withdrawal limit and fees make it expensive for frequent transactions. Most people use a money market account for savings and a checking account for daily spending.
What happens to my interest if I withdraw money?
You keep the interest you've already earned. If you withdraw $5,000 from a $10,000 balance, you still own the interest that was credited to your account. Interest stops accruing on the $5,000 you withdrew, but continues on the remaining $5,000.
Can the bank lower my interest rate without warning?
Yes. Banks can change rates at any time without notice. When the Federal Reserve cuts rates, banks typically lower money market rates within days. You're not locked into a rate like you would be with a certificate of deposit (CD). If rates drop significantly, you can move your money to a different bank offering a higher rate.
Is my money safe in a money market account?
Yes, up to $250,000 per account holder per institution. The FDIC (at banks) or NCUA (at credit unions) insures deposits, so if the bank fails, your money is protected. If you have more than $250,000, spread it across multiple banks to keep all of it insured.
How long does it take to transfer money out of a money market account?
Transfers to another account at the same bank are usually instant or take one business day. Transfers to an external account at a different bank typically take one to three business days. Checks take as long as the recipient takes to deposit them, usually three to five business days.