A money market account is a hybrid savings product that combines features of checking and savings accounts
A money market account (MMA) is a deposit account offered by banks and credit unions. It typically pays interest higher than a regular savings account, but lower than a certificate of deposit (CD). In exchange for that higher rate, the account usually requires a larger opening deposit—often $2,500 to $25,000, though this varies by institution—and you can write checks or make transfers, but with limits on how many per month.
The account is called "money market" because the bank uses your deposit to buy short-term debt securities (money market instruments) and passes some of the interest back to you. You are not buying those securities yourself; the bank does. Your deposit is insured by the FDIC (if the bank is FDIC-insured) or the NCUA (if it is a credit union) up to $250,000 per account owner per institution.
Money market accounts sit between a regular savings account and a CD in terms of rate, flexibility, and minimum balance. They are useful if you want better interest than savings but need occasional access to your money without waiting for a CD to mature.
Key Takeaways
- Money market accounts pay higher interest than savings accounts but require a larger minimum deposit, usually $2,500 to $25,000.
- You can write checks and make transfers, but most accounts limit you to six outgoing transactions per month; exceeding that may trigger fees or account closure.
- Interest rates on money market accounts fluctuate with the Federal Reserve's rate changes and vary widely between institutions, so shopping around matters.
- Your deposit is FDIC-insured up to $250,000, but the account is not a substitute for emergency savings if you need money within days.
How the interest rate and minimum balance work
Money market accounts offer a variable interest rate, meaning the rate changes over time. Banks set their rates based on the Federal Reserve's benchmark rate and their own funding needs. When the Fed raises rates, banks typically raise money market rates within weeks. When the Fed cuts rates, banks usually cut money market rates more slowly. This means your rate can go up or down without warning.
The minimum deposit to open an account ranges from $2,500 to $25,000 depending on the bank. Some online banks have lower minimums ($500 to $1,000) or no minimum at all. If your balance falls below the minimum, the bank may charge a monthly fee (typically $10 to $25), lower your interest rate, or close the account. A few banks waive the minimum if you set up automatic deposits or maintain a linked checking account.
Interest compounds daily or monthly depending on the bank's terms. Compounding means the bank pays interest on your interest, so your balance grows faster than with simple interest. The more frequently interest compounds, the more you earn, though the difference is usually small.
Transaction limits and what happens when you exceed them
Federal rules (Regulation D) historically limited money market accounts to six outgoing transactions per month—transfers to other accounts, checks written, or debit card withdrawals. In 2020, the Federal Reserve suspended this rule, and most banks removed the limit. However, some banks still impose limits or charge a fee for excess transactions, so you need to check your account's terms.
If you exceed the limit, the bank may charge a per-transaction fee ($10 to $35), refuse the transaction, or close the account. Some banks convert the account to a regular savings account, which may lower your interest rate. A few banks allow unlimited transactions but reduce your interest rate if you exceed a certain number per month.
In practice, money market accounts are designed for people who want to earn interest on a large balance but do not need to move money in and out constantly. If you need frequent access, a high-yield savings account (which typically has no transaction limits) may be a better fit.
Comparing money market accounts to savings accounts and CDs
| Feature | Money Market Account | High-Yield Savings | Certificate of Deposit (CD) |
|---|---|---|---|
| Minimum deposit | $2,500–$25,000 | $0–$1,000 | $500–$2,500 |
| Interest rate | Variable, mid-range | Variable, competitive | Fixed, highest |
| Access to money | Checks, transfers (may be limited) | Transfers, no limits | Locked until maturity; early withdrawal penalty |
| FDIC insured | Yes, up to $250,000 | Yes, up to $250,000 | Yes, up to $250,000 |
| Best for | Large balance, occasional access | Large balance, frequent access | Money you won't need for months or years |
A high-yield savings account typically offers a rate nearly as good as a money market account, with no minimum deposit and no transaction limits. The trade-off is that you cannot write checks. If you want to move money, you transfer it electronically, which takes one to three business days.
A CD locks your money for a set term (three months to five years). In exchange, the bank guarantees a fixed rate, which is usually higher than a money market account. If you withdraw before the term ends, you pay a penalty (typically three to six months of interest). CDs are useful if you know you will not need the money and want to lock in a rate before rates fall.
Fees to watch for
Money market accounts can carry several fees beyond the monthly maintenance charge. A minimum balance fee ($10 to $25 per month) applies if your balance drops below the required minimum. An excess transaction fee ($10 to $35 per transaction) is charged if you exceed the monthly limit. Some banks charge an inactivity fee if you do not make a deposit or withdrawal for a set period (usually six months to a year).
A few banks charge a fee to close the account if you close it within a certain time frame (often 90 days to one year). Read the account disclosure document before opening an account; it lists all fees and the conditions that trigger them. Online banks typically have lower or no fees because they have lower overhead than brick-and-mortar banks.
How to choose between banks and what to compare
Start by comparing the current interest rate across at least three banks. Rates change frequently, so a rate that is competitive today may not be next month. Check the bank's website or call to confirm the rate applies to new accounts and whether it is promotional (temporary) or standard.
Next, confirm the minimum deposit and whether fees apply if you fall below it. Ask whether the bank waives the minimum for automatic deposits or linked accounts. Check the transaction limit policy: does the bank still enforce Regulation D limits, charge fees for excess transactions, or allow unlimited activity?
Verify that the bank is FDIC-insured (for banks) or NCUA-insured (for credit unions). Search the FDIC's BankFind tool or the NCUA's credit union locator to confirm. If you have more than $250,000, you can open accounts at multiple institutions to keep all deposits insured.
When a money market account makes sense and when it does not
A money market account is a good fit if you have $10,000 or more to deposit, want a rate higher than a savings account, and do not need to move the money frequently. It works well for a short-term goal (one to three years) where you might need to access the money but do not want to lock it in a CD.
A money market account is not the right choice if you have less than $2,500 (most banks will charge fees), need to move money in and out constantly (a high-yield savings account is simpler), or want the highest possible rate (a CD or high-yield savings account may pay more). It is also not a substitute for an emergency fund in a checking account; money in a money market account takes one to three business days to access, which is too slow if you need cash today.
Frequently Asked Questions
Can I lose money in a money market account?
No. Your principal is FDIC-insured up to $250,000, so the bank cannot lose your deposit. The interest rate can fall, so you earn less, but your balance does not shrink. The only way to lose money is if you withdraw early from a CD (which is not a money market account) and pay a penalty.
How often does the interest rate change?
Money market rates change whenever the bank decides to adjust them, which is usually within weeks of a Federal Reserve rate change. Some banks change rates monthly; others change them quarterly or as needed. Check your account statements or log into your account online to see your current rate.
What happens if I write too many checks?
Most banks no longer enforce transaction limits, but some still do. If your account has a limit and you exceed it, the bank may charge a fee per excess transaction, refuse the check, or convert your account to a savings account with a lower rate. Check your account agreement to see what your bank's policy is.
Is a money market account the same as a money market fund?
No. A money market account is a bank deposit account insured by the FDIC. A money market fund is an investment product sold by brokerages and mutual fund companies; it is not FDIC-insured and can lose value. They have similar names but are different products with different risks.
Can I transfer money from a money market account to pay bills?
Yes, you can write checks or set up transfers to pay bills. However, if your account has transaction limits and you exceed them, you may be charged a fee or the transaction may be refused. A regular checking account is simpler for frequent bill payments.