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

A money market account is technically a type of savings account — your bank holds the money, insures it up to $250,000 through the FDIC, and pays you interest. But it works differently from a standard savings account in ways that matter to how you use it.

The main difference: money market accounts usually pay higher interest rates, but they limit how often you can withdraw money and often require a larger opening deposit. A standard savings account lets you withdraw whenever you want with no penalty, but the interest rate is typically lower. Both are savings products — neither is a checking account — but they're built for different goals.

Key Takeaways

  • Money market accounts are savings accounts that pay higher interest but restrict withdrawals to a set number per month, usually three to six.
  • Standard savings accounts have no withdrawal limits but pay lower interest rates, making them better for money you need to access frequently.
  • Both are FDIC-insured up to $250,000 and both earn interest, so the choice depends on whether you prioritize access or higher returns.
  • Money market accounts often require a minimum deposit of $2,500 to $25,000, while savings accounts may have no minimum or a much lower one.
  • If you exceed the withdrawal limit on a money market account, your bank may charge a fee, convert the account to a checking account, or close it.

How withdrawal limits work on a money market account

Federal rules once capped all savings account withdrawals at six per month, but that rule was suspended in 2020. Banks now set their own limits. Most money market accounts allow three to six withdrawals per month before a fee kicks in — usually $25 to $35 per excess withdrawal.

The limit applies to transfers and withdrawals combined. If you withdraw cash at an ATM, transfer money to another account, or write a check (if your money market account comes with a checkbook), each one counts toward your limit. Deposits don't count — you can deposit as often as you want.

If you repeatedly exceed the limit, some banks will convert your money market account to a regular checking account or close it entirely. Check your account agreement to see what your bank does.

Interest rates: why money market accounts pay more

Money market accounts typically pay 0.5% to 5.35% annual interest, depending on the bank and current economic conditions. Standard savings accounts usually pay 0.01% to 0.5%. The difference exists because banks can predict that money market account holders will keep their money in the account longer — the withdrawal restrictions make frequent access inconvenient.

Banks use that predictability to invest the money longer-term, which generates more return, and they pass some of that back to you as higher interest. The tradeoff is access: you get more money over time, but you can't touch it as freely.

Interest rates change based on what the Federal Reserve does with its benchmark rate. When rates rise, both savings and money market accounts pay more. When rates fall, both pay less. Money market accounts will still typically pay more than savings accounts, but the gap narrows or widens depending on the economic cycle.

Minimum deposits and account fees

Money market accounts often require an opening deposit of $2,500 to $25,000, though some banks have no minimum. Standard savings accounts frequently have no minimum or ask for $100 to $500. If you have less than the minimum, you won't be able to open a money market account at that bank.

Both account types may charge monthly maintenance fees if your balance falls below a threshold or if you don't meet other conditions (like setting up direct deposit). Some banks waive the fee if you maintain a certain balance — often $1,000 to $10,000 for savings accounts, $2,500 to $25,000 for money market accounts. Read the fee schedule before you open the account.

When to use each account type

Use a standard savings account if you're building an emergency fund and need to withdraw money quickly without penalty, or if you're saving for something in the near term and want flexibility. Use it if you don't have the minimum deposit a money market account requires, or if you want to make frequent transfers.

Use a money market account if you have money you won't need for several months or longer, you can meet the minimum deposit, and you want the highest interest rate your bank offers. It's useful for a secondary emergency fund, a down payment you're saving for over a year or more, or money set aside for a specific goal that's not urgent.

If you need to access money regularly — paying bills, making purchases, or moving money between accounts frequently — a money market account's withdrawal limits will frustrate you. A checking account or standard savings account is better for that.

FDIC insurance and safety

Both money market accounts and standard savings accounts are insured by the FDIC up to $250,000 per depositor, per bank. If the bank fails, you get your money back up to that limit. This insurance applies to the account balance plus any interest earned.

If you have more than $250,000, you can protect the excess by opening accounts at different banks — each bank's $250,000 limit is separate. Some banks also offer "sweep" features that automatically move money over $250,000 to a linked account at a partner bank to keep it all insured.

Money market accounts versus money market funds

Don't confuse a money market account with a money market fund. A money market account is a bank product insured by the FDIC. A money market fund is an investment product sold by brokerages and mutual fund companies — it's not FDIC-insured, though it's generally considered low-risk because it invests in short-term debt.

Money market funds sometimes pay slightly higher interest than money market accounts, but you can lose money if the underlying investments decline in value. Money market accounts may provide your principal — you won't lose what you deposit. If safety is your priority, stick with the bank account.

Frequently Asked Questions

Can I write checks from a money market account?

Some banks include a checkbook with money market accounts; others don't. If yours does, each check counts toward your monthly withdrawal limit. Ask your bank whether checks are included before you open the account, and if they are, factor that into how many withdrawals you actually need per month.

What happens if I go over the withdrawal limit?

Your bank will charge a fee per excess withdrawal, usually $25 to $35. If you repeatedly exceed the limit, the bank may convert your account to a checking account, close it, or restrict future withdrawals. Check your account agreement to see your bank's specific policy.

Do I pay taxes on money market account interest?

Yes. Interest earned on a money market account is taxable income. Your bank will send you a 1099-INT form at tax time if you earned $10 or more in interest during the year. You report this on your tax return.

Can I move money from a savings account to a money market account?

Yes. If you already have a savings account at the same bank, you can usually open a money market account and transfer money between them. Each transfer counts toward the money market account's monthly withdrawal limit if you're moving money out of it.

Which pays more interest right now, savings or money market?

Money market accounts almost always pay more, but the exact rates change based on economic conditions and which bank you use. Compare rates on your bank's website or on rate-comparison sites to see the current difference and find the highest-paying option for your situation.