How do money market accounts work? (2023)

A money market account (MMA) is neither a checking account nor a savings account, but as a hybrid of the two, it has certain common characteristics of both. It allows account holders to make withdrawals, transfers and debit card transactions just as they would with a regular checking account, while often offering higher interest rates than traditional savings accounts.

Learn more about what money market accounts are and how they work.

key takeaways

  • A money market account is neither a checking account nor a savings account, but it has certain characteristics similar to both.
  • Like regular checking accounts, money market accounts allow account holders to make withdrawals and transfers and write checks. They may also allow debit card transactions and online bill payment.
  • Many MMAs offer unlimited ATM withdrawals, but limit other types of withdrawals and transfers.
  • MMAs tend to offer higher interest rates on average than traditional savings accounts, but often require higher minimum daily balances.
  • Hebest high yield savings account ratescan beatbest money market account rates.

A brief history of money market accounts

The banks created a hybridMarkedsconti (MMA)offer more competitive interest rates than those offered by traditionalKeep accountance. But it doesn't come without a cost. The trade-off for higher rates is often a higher minimum deposit requirement.

With many MMAs, the account must maintain a minimum daily balance (generally $1,000 and above) to receive the highest interest rate available. Many MMAs have tiered savings levels that offer higher interest rates for higher savings levels.

MMAs became popular during the 1980s when interest rates rose to double digits, allowing depositors to earn high returns without risk. Deposits to MMA are often invested in vehicles such as e.gcertificates of deposit (CD), government securities andcommercial paperthat provide higher returns than those typically found in savings accounts.

Checking or savings account?

There is often some confusion about what a money market account actually is. An MMA is neither a checking account nor a savings account. But it has certain features similar to both. Money market accounts generally offer higher returns than traditional savings accounts.

are able to offermore attractive interest rateby setting higher minimum balance requirements and by potentially limiting the number of withdrawals that can be made in a given period.

By April 24, 2020, as determined by the Federal ReserveRule D, MMA and savings account holders were limited to six withdrawals or transfers per month.If more than six withdrawals were made, an account could be fined. This restriction has been removed, but some banks still set limits on withdrawals and charge fees if you exceed the allowed number of transactions.

Similarities to checking accounts

MMAs are deposit accounts insured byFederal Deposit Insurance Corporation (FDIC).They are offered by banks, credit unions and other financial institutions, such as those that operate online. An MMA has several benefits similar to a checking account.

For example, many money market accounts offer debit cards and checks. This allows account holders to make cash withdrawals or retail purchases using the card. If the institution offers online banking privileges, customers can also make transfers and pay bills the same way they would with a checking account.And many MMAs allow unlimited ATM withdrawals and personal debiting at a bank branch. However, the number of other types of withdrawals you are allowed each month may be limited.

Comparing checking, savings and money market accounts
Check accountSavings accountmoney market account
Federally Insured Deposit AccountAndAndAnd
Withdrawals, transfers allowedAndYes, but their number may be limited.Yes, but their number may be limited.
Allows payment card transactionsAndSometimesSometimes
Minimum requirements for daily balanceSometimesSometimesTit
interest paidSometimes, however, the rates are the lowest of the three types of accountsYes, but lower interest rates than usual on the money marketsYes, usually higher than a regular savings account


Although it has some elements of a checking account, the main point of an MMA is the savings part. This means that the account balance earns interest, and the interest paid is often higher than what a traditional savings account earns.ManyMMAs offer interest-basedon an offset balance; lower balances earn a lower rate, while higher balances are rewarded with more interest.

Institutions can justify the higher interest rate by setting aminimal balancerequirements. If your balance falls below this amount, the bank can lower the high interest rate. Banks may also charge fees for not reaching the minimum balance.


While MMAs generally offer higher rates than traditional savings accounts, the relationship is often reversed if you're looking for the highest rates available. That's according to Investopedia researchbest high yield savings account ratesstrikes oftenbest MMA awards.

Can you lose money in a money market account?

You cannot lose money in your money market account unless you deposit more than the federally insured amount of $250,000 and the institution goes bankrupt. Money market accounts in banks are insured byFederal Deposit Insurance Corporation (FDIC)and for himNational Administration of Credit Unions (NCUA), if the account is with a credit union.

Is it worth putting money in a money market account?

Whether it is worth putting money in a money market account depends on the needs of the individual. A money market account can have a higher interest rate than a traditional savings account, allowing the account holder to earn more money on their deposits. Money market accounts are easier to access than traditional savings accounts and are also protected by the FDIC or NCUA.But money market accounts tend to have higher minimum balance requirements that must be maintained.

What is the difference between a CD and a money market account?

A money market account offers the benefits of both a checking and savings account: easy access to funds and higher interest on deposits. TOcertificate of deposit (CD), on the other hand, the cash is tied up for a certain period, which makes the money unavailable to the account holder.

Bottom line

Money market accounts are suitable for people who can meet minimum balance requirements that may be higher than those required by a traditional savings account, in exchange for a higher interest rate on your savings compared to a traditional savings account. Money market accounts generally allow account holders to make withdrawals and transfers, and they may allow debit card transactions and online bill payment just like regular checking accounts. But keep in mind that there may be limits on how often you can make withdrawals or transfers from a money market account.

the article's sources

Investopedia requires authors to use primary sources to support their work. These include white papers, government data, original reports and interviews with industry experts. We also refer to original research from other reputable publishers where relevant. You can learn more about the standards we follow to produce accurate and unbiased content on oureditorial policy.

  1. Consumer Financial Protection Bureau. "What is a money market account??"

  2. Federal Reserve System. "Rule D reserve requirement" Side 3.

  3. Federal Reserve System. "Rule D reserve requirement," Side 1.

  4. Federal Deposit Insurance Corporation"Are my deposit accounts insured by the FDIC??"

  5. Experian. "Advantages and disadvantages of money market accounts."

  6. National Administration of Savings and Credit Cooperatives. "Equity insurance fund Overview."

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