A money market account is a deposit account at a bank or credit union that earns interest on your balance while still letting you access your money through checks, debit cards, and transfers. It combines features of both savings and checking accounts: you earn a competitive yield like a savings account, but you can write checks and sometimes use a debit card like a checking account. The trade-off is that most money market accounts require a higher minimum balance and limit how many withdrawals you can make each month.
How Interest Works on Your Balance
Money market accounts typically use a tiered interest rate structure, meaning the rate you earn depends on how much money you keep in the account. A bank might set up five tiers based on your balance. Balances under $2,500 earn the lowest rate, then the rate bumps up for balances in the mid-four figures, again for five-figure balances, again at six figures, and the highest rate kicks in above $500,000.
Some banks tie their tiers to a benchmark rate like the prime rate, adding a larger spread as your balance grows. For example, a deposit between $10,000 and $50,000 might earn prime plus 0.25%, while a deposit above $500,000 earns prime plus 1%. This means your rate can shift when the benchmark moves, not just when you add or withdraw funds.
The practical takeaway: the APY advertised in big numbers on a bank’s website is often the rate for the highest balance tier. If you’re depositing $5,000, your actual rate could be noticeably lower. Always check the full rate schedule before opening an account.
How You Access Your Money
Unlike a standard savings account, most money market accounts let you write checks directly from the account. Many banks provide a free set of checks when you open the account, and you can order more through the bank or a third-party provider. Some accounts also come with a debit card for ATM withdrawals or point-of-sale purchases.
That said, money market accounts are not designed for everyday spending. Many banks still limit you to six withdrawals per month, covering most electronic transfers, phone transfers, and check payments. This limit used to be a federal requirement under the Federal Reserve’s Regulation D, but the Fed suspended that rule in April 2020. Despite the change, most banks and credit unions voluntarily kept the cap in place. A few institutions have loosened things up. Ally Bank, for instance, allows 10 withdrawals per month with no fee for going over, though repeated overages could lead to account closure. Navy Federal Credit Union allows unlimited withdrawals from its money market savings account.
Certain types of withdrawals are generally exempt from monthly limits. Withdrawals made in person at a branch, by mail, or at an ATM typically don’t count toward the cap. There’s also no limit on deposits, including check deposits.
Minimum Balance and Fees
Money market accounts often require a higher minimum deposit than a regular savings account. Across the market, minimum opening deposits range from $0 at some online banks to $2,500 or more at others. Monthly maintenance fees vary just as widely. Many online banks charge nothing at all, while some traditional banks charge up to $15 per month, often waiving the fee if you maintain a certain balance.
If your balance dips below the required minimum, you may lose your higher-tier interest rate, get charged a monthly fee, or both. Before you open an account, check three things: the minimum deposit to open, the minimum balance to avoid fees, and the minimum balance needed to earn the advertised APY. These can be three different numbers.
FDIC and NCUA Insurance
Money market accounts at banks are covered by FDIC insurance, and accounts at credit unions are covered by NCUA insurance. Both protect your deposits up to $250,000 per depositor, per institution, per ownership category. That coverage is automatic. You don’t need to apply for it or pay anything extra. If your bank or credit union fails, your balance (including any accrued interest) is insured dollar for dollar up to that limit.
If you hold accounts in different ownership categories at the same bank, such as an individual account, a joint account, and a trust account, each category is separately insured up to $250,000. That means a married couple could potentially protect well over $250,000 at a single institution by using multiple ownership categories.
Money Market Account vs. Money Market Fund
The names sound nearly identical, but these are fundamentally different products. A money market account is a deposit account held at a bank or credit union. It’s federally insured, and your principal is safe up to the insurance limit.
A money market fund (sometimes called a money market mutual fund) is an investment product held at a brokerage. It pools your money into short-term securities like U.S. Treasury bills, corporate debt, or bank debt instruments. Money market funds are not federally insured. While they’re considered low-risk investments, they can theoretically lose value. The key question is whether you want the absolute safety of deposit insurance or you’re comfortable with a very small degree of investment risk in exchange for potentially different yields.
When a Money Market Account Makes Sense
A money market account works well as a place to park cash you might need relatively soon, such as an emergency fund, a down payment you’re saving, or business operating funds. You earn more than a typical checking account, your money is federally insured, and you can still get to it without waiting for a CD to mature or selling an investment.
The account is less useful if you need to make frequent transactions. If you’re writing more than a handful of checks or making more than a few transfers per month, a checking account is a better fit. And if you’re saving for a goal several years away and don’t need access to the money, a CD or investment account may offer better long-term returns. Money market accounts sit in the middle: more flexibility than a CD, more yield than checking, and more safety than a brokerage fund.