A money market account is a hybrid—it has features of both checking and savings, but is legally neither
A money market account (MMA) sits between checking and savings accounts in how banks classify it. It earns interest like a savings account, but it lets you write checks and use a debit card like a checking account. However, the law treats it differently from both. The Federal Reserve's Regulation D once capped withdrawals at six per month, though that rule changed in 2020. Most banks still limit how often you can move money out, and they charge fees if you exceed those limits. The interest rate is usually higher than a savings account but lower than a certificate of deposit (CD).
The key difference: a money market account is a money market deposit account (MMDA), a specific product regulated under banking law. It is not a checking account (which has no withdrawal limits and typically earns no interest) and not a savings account (which earns interest but usually has no check-writing ability). Banks use the term "money market" to describe the type of investment the account is tied to—short-term, low-risk debt instruments—not the account category itself.
Key Takeaways
- Money market accounts earn interest and allow limited check-writing and debit card use, combining features of both checking and savings accounts.
- Banks typically limit withdrawals or transfers to a set number per month, and charge fees if you exceed that limit.
- Interest rates on money market accounts vary by bank and are usually higher than savings accounts but lower than CDs.
- Money market accounts require a higher minimum balance than most checking or savings accounts, often $2,500 to $25,000 depending on the bank.
How withdrawal limits work on a money market account
Most banks set a limit on how many times per month you can withdraw money or transfer it out—commonly six times, though some allow more. This limit applies to all outgoing transactions: checks you write, debit card purchases, transfers to another bank, and ATM withdrawals all count toward the same cap. Once you hit the limit, the bank may refuse the transaction, charge a fee (typically $25 to $35 per excess withdrawal), or convert your account to a savings account with no check-writing ability.
Deposits and transfers in do not count against the limit. You can move money into the account as often as you want. The restriction is only on money leaving. This is why money market accounts work best for people who need occasional access to their cash but do not need to move it constantly—someone saving for a down payment or keeping an emergency fund, for example.
Minimum balance requirements are usually higher
Money market accounts typically require a higher opening balance than a checking or savings account. Most banks ask for $2,500 to $10,000 to open one, though some require $25,000 or more. If your balance drops below the minimum, the bank may charge a monthly fee of $10 to $25, or close the account entirely.
This higher barrier is one reason money market accounts are less common for everyday banking. If you have a smaller amount to save, a regular savings account will cost you less to maintain. Check your bank's specific terms before opening, because minimums vary widely.
Interest rates and how they compare
Money market accounts pay interest, which checking accounts do not. The rate varies by bank and changes with the Federal Reserve's benchmark rate. As of early 2024, online banks offer rates between 4% and 5% annually on money market accounts, while traditional brick-and-mortar banks often pay 0.5% to 1.5%. These rates change frequently, so check your bank's current offer before opening.
A savings account at the same bank usually pays slightly less than a money market account. A CD typically pays more, but locks your money away for a fixed term (three months to five years). If you need some access to your money but want better returns than a savings account, a money market account fills that gap—as long as you do not need to withdraw more than six times per month.
When to use a money market account instead of checking or savings
A money market account makes sense if you have a specific goal—saving for a house, a car, or a major expense—and you want to earn interest while keeping the money somewhat accessible. You might write one or two checks per month to pay a bill or transfer money, but you do not need constant access like you would with a checking account.
Do not use a money market account as your primary checking account. If you pay bills frequently, use your debit card multiple times a week, or transfer money to friends regularly, you will hit the withdrawal limit and pay fees. For that, a checking account is the right tool. A money market account is best paired with a checking account: use checking for daily spending and bills, and a money market account for money you are setting aside.
FDIC protection and safety
Money market accounts at banks are covered by FDIC insurance up to $250,000 per depositor, per bank. This means if the bank fails, your money is protected up to that limit. This protection applies whether the account is called a money market account, savings account, or checking account—the category does not matter for insurance purposes.
Do not confuse a bank money market account with a money market mutual fund offered by investment firms. Mutual funds are not FDIC-insured and carry investment risk. If your bank offers both, make sure you understand which one you are opening.
How to decide: money market, checking, or savings
| Feature | Checking Account | Savings Account | Money Market Account |
|---|---|---|---|
| Earns interest | Usually no | Yes | Yes |
| Write checks | Yes, unlimited | No | Yes, limited |
| Debit card | Yes | No | Yes, limited |
| Withdrawal limit | None | Often 6 per month | Often 6 per month |
| Minimum balance | $0 to $500 | $0 to $500 | $2,500 to $25,000 |
| Best for | Daily spending and bills | Short-term savings | Goal-based savings with occasional access |
Frequently Asked Questions
Can I use a money market account to pay all my bills?
You can write checks from a money market account, but most banks limit you to six per month. If you pay more than six bills monthly, you will exceed the limit and face fees. Use a checking account for regular bills and a money market account for savings.
Do money market accounts have overdraft protection?
Some banks offer overdraft protection on money market accounts, but it is less common than on checking accounts. Ask your bank before opening. If you overdraft, you will pay a fee (typically $25 to $35) whether or not protection is in place.
What happens if I withdraw more than the limit?
The bank will either refuse the transaction, charge a fee per excess withdrawal, or automatically convert your account to a savings account with no check-writing ability. Check your bank's specific policy in the account agreement.
Is the interest rate on a money market account may provide?
No. Banks change rates frequently, usually in response to Federal Reserve rate changes. Your rate may be higher or lower next month. Some banks offer a promotional rate for the first few months, then drop it lower.
Can I have both a checking account and a money market account at the same bank?
Yes. Most people do this: a checking account for daily spending and bills, and a money market account for savings. You can transfer money between them, though transfers out of the money market account count toward your monthly withdrawal limit.