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What Is A Money Market Account?

Surbhi Arora
Surbhi Arora
Surbhi is a finance copywriter, editor, and content strategist. She writes regularly for, covering a wide range of financial topics including personal finance, digital banking, payments, lending, BaaS, and embedded finance. With a keen eye for detail and a profound understanding of the finance industry, Surbhi crafts engaging and informative content that helps readers stay ahead of the curve.

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Table of Contents

A money market account is a lucrative alternative to traditional savings accounts, and offers customers the benefit of higher interest income on deposits.

Takeaway Points

  • A money market account helps customers maximize interest-earning potential on deposits. The rise in interest rates and the likelihood of recession make this proposition even sweeter for the customers.
  • As per FDIC data released in Dec’22, money market accounts offered higher deposit yields of 0.38% based on the average of the $10,000 product tier, while the yield for savings accounts based on the $2,500 product tier is 0.30%.
  • Although it is a marginal increase, some of the financial institutions offer annual interest rates of up to 4.25% with varying minimum balance requirements.

What is a Money Market Account?

A money market account offers higher interest income than a traditional savings account and often provides check-writing and debit card benefits. Such an account type imposes higher minimum balance restrictions and combines the best elements of both checking and savings accounts.

Although it allows you some flexibility to access cash when you need it, they are not meant to be used as a regular checking account and are subject to federal transaction limits (six withdrawals per month).

Money market accounts enable customers to grow money faster without the risk associated with investing accounts. Since qualifying money market accounts are FDIC-insured up to $250,000 per depositor, for each account ownership type, the money is protected in an event of a bank failure.

Money Market Account Features

Money market accounts are offered by numerous internet institutions in addition to traditional brick-and-mortar banks and credit unions as they have lower operating costs than traditional banks, online banks might even provide greater rates as well.

As a customer opens a money market account, they typically receive a combination of the following features:

  • Higher interest rates with regular compounding and monthly payment
  • FDIC Insurance
  • Minimum balance requirements
  • A debit card or ATM card
  • Monthly withdrawal restrictions
  • Check writing allowance/capability
  • Monthly maintenance/service fee

Pros and Cons of Money Market Accounts

Depending on your banking requirements, a money market account may be a wise choice for savings, but it may not be a cup of tea for everyone.

When determining whether to keep your money in a money market account, weigh the advantages and disadvantages listed below.

Pros Cons
  • FDIC-NCUA Insurance Protection
  • Account Maintenance Charges/Service Fee
  • Check-writing Privileges
  • Restricted Monthly Transactions
  • Competitive Annual Percentage Yield
  • Higher Minimum Balance Requirements
  • Debit Card Availability
  • High Initial Deposit Requirements
  • High Rate of Interest
  • Oscillating interest rates

How to Open a Money Market Account?

Money market accounts are widely available at credit unions and banks. Please consider the below points while comparing money market accounts.

  • To avoid any loss in the form of a maintenance fee, withdrawal fee, or fee for deviating from the minimum required balance amount, compare the fee because it can eat into your earnings.
  • The bank will require basic information whether you apply for a money market account in person or online. It will request a legitimate government ID, such as your passport or driver’s license, for eligibility.
  • Remember to order your chexSystems report, which provides insights into your banking activity, to ensure that the account application is processed promptly.
  • When opening a money market account, some banks require a deposit; however, other banks allow you to open the account and add funds later. Banks’ minimum deposit requirements can be very different, with some requesting nothing upfront and others demanding $1,000 or more. You might get a higher Annual Percentage Yield (APY) if you can afford a bigger deposit.

What distinguishes a Money Market Fund from a Money Market Account?

A money market fund is a particular type of investment account. It’s commonly referred to as a mutual fund for money markets. It is a low-risk investment plan that typically invests in high-quality securities. The best money market mutual funds give you a flexible way to invest your money and earn a high rate of interest at the same time.

Alternative to Money Market Account

Services that are offered by money market accounts are somewhat different from those provided by other bank accounts. Here’s how they stack up against the standard bank accounts that the majority of full-service banks provide.

High-Yield Savings Account (Account with a High Rate of Return)

A money market account is altogether different from a conventional savings account. The idea or usage is the opposite of traditional saving accounts, which customer’s mostly use.

The biggest distinction between the two accounts is that money market accounts, particularly the best money market accounts provided by online banks, typically offer a higher APY. Additionally, you acquire a debit card and the ability to write checks.

Checking Account/Savings account

Checking accounts are used for regular transactions. Money market accounts don’t operate that way because they typically impose monthly transaction caps.

Customers should continue to keep their money in a checking account if they want to keep it readily available for daily transactions. Some money market accounts offer benefits similar to checking accounts, such as debit cards for ATM access and the ability to write checks.

A significant distinction between the accounts is the interest that money market accounts pay. Most checking accounts don’t pay interest, and those that do typically pay lower APYs than a lot of money market accounts.

Certificate of Deposit (CD)

CD accounts are somewhat similar to Money Market Accounts in terms of interest rates. CD accounts imply the requirement to leave funds for a specific period to earn a high rate of interest.

The term period could range from one month to ten years. During the specific mentioned period, one cannot withdraw funds without being charged a penalty.

Another prominent difference between CD accounts and money market accounts is the interest rate type. While CD accounts lock in the fixed interest rate towards the very beginning of the term, money market accounts carry variable APYs which are prone to fall or rise on any occasion.

Money market accounts retain a high rate of interest for higher deposits. On the other hand, CD rates provide longer CD terms. In any case, both accounts offer low investment risk as well as assured earnings and FDIC-insured deposits.

Bottom line

As we assessed, a money market accounts typically offer a higher rate of interest than traditional savings accounts. Moreover, it allows you to keep your money safe for a certain time while keeping it accessible to other users.

Undoubtedly, MMA provides you with a sense of security with FDIC-insured deposits. However, money market account comes with certain restrictions which don’t fit everyone’s pocket.

Some banks require you to maintain a higher minimum balance along with a monthly fee. Also, it imposes withdrawal limits, so it would be better for a customer to seek his banking priorities before opening an MMA.

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