A money market account is a checking account that pays you interest on your balance

A money market account (sometimes called an MMA) combines features of a regular checking account with features of a savings account. You get a debit card and checks to spend your money, just like a standard checking account. But unlike a standard checking account, the bank pays you interest on the money you keep in the account — the same way a savings account does.

The tradeoff is that money market accounts usually require you to keep a higher minimum balance than a regular checking account, and they limit how many withdrawals you can make each month. If you drop below the minimum or exceed the withdrawal limit, the bank charges a fee or stops paying interest.

Money market accounts make sense if you want to earn interest on money you need to access quickly, but they are not the right choice if you need to move money in and out frequently or if you cannot maintain a higher balance.

Key Takeaways

  • Money market accounts pay interest on your balance while letting you write checks and use a debit card, unlike a regular savings account.
  • Most money market accounts require a minimum balance — often $2,500 to $10,000 — to earn interest or avoid monthly fees.
  • Banks limit the number of withdrawals or transfers you can make each month, typically to six, and charge fees if you exceed that limit.
  • Interest rates on money market accounts change with the market and vary by bank, so comparing rates across institutions matters.
  • Money market accounts are FDIC insured up to $250,000, the same protection as a regular checking or savings account.

How interest payments work on a money market account

The bank pays you interest because it uses your deposited money to lend to other customers or invest in short-term securities. The interest rate — called the Annual Percentage Yield or APY — tells you what percentage of your balance you will earn in a year if the rate stays the same.

Interest rates on money market accounts move up and down with the broader economy. When the Federal Reserve raises its benchmark interest rate, banks typically raise the APY they offer on money market accounts. When the Federal Reserve lowers rates, banks lower their APYs. This means the rate you see today may be different next month.

The bank calculates interest daily based on your balance and deposits it into your account monthly or quarterly, depending on the bank's terms. If you withdraw money, your balance drops and you earn less interest that month. If you add money, your balance rises and you earn more.

Minimum balance requirements and what happens if you fall short

Most money market accounts require you to maintain a minimum balance — the lowest amount of money you must keep in the account at all times. This minimum typically ranges from $2,500 to $10,000, though some banks require more and some require less. A few banks offer money market accounts with no minimum, but these are less common.

If your balance drops below the minimum, one of two things usually happens: the bank stops paying interest on your account, or it charges you a monthly fee (often $10 to $25). Some banks do both. Check your account agreement to see which applies to you.

The minimum is calculated on different days depending on the bank — some use the lowest balance on any day during the month, others use the average balance across the month. This matters because it affects whether you stay above the minimum. Ask your bank how they calculate it before you open the account.

Withdrawal limits and why banks impose them

Money market accounts come with a limit on how many times per month you can withdraw money or transfer it out. The limit is usually six withdrawals or transfers per month, though some banks allow more and some allow fewer. Withdrawals at an ATM, transfers to another bank, checks you write, and debit card purchases may all count toward this limit — or only some of them do, depending on the bank.

Banks impose these limits because money market accounts are designed for money you want to keep relatively stable, not money you move constantly. If you exceed the limit, the bank charges a fee per excess withdrawal (often $10 to $25) or may convert your account to a regular checking account, which usually pays no interest.

Before you open a money market account, ask your bank exactly what counts as a withdrawal and how many you can make. If you know you will need to move money in and out frequently, a regular checking account is a better fit.

Money market accounts versus savings accounts and regular checking

A regular savings account also pays interest, but it offers no debit card or checks — you can only withdraw money at an ATM or by visiting a branch. A money market account gives you both interest and the ability to spend your money with a debit card or checks, which is more convenient.

A regular checking account lets you write unlimited checks and make unlimited withdrawals, but it pays little or no interest. A money market account limits your withdrawals but pays interest in return.

The choice depends on what you need the account for. If you want to earn interest on money you spend regularly, a money market account works. If you want to earn interest on money you rarely touch, a savings account is simpler. If you need unlimited access and do not care about interest, a regular checking account is the right choice.

Where to find money market accounts and how rates compare

Most banks and credit unions offer money market accounts. You can open one at a traditional bank with physical branches, an online bank, or a credit union. Online banks often offer higher interest rates because they have lower overhead costs, but they may have fewer ways to deposit cash (you cannot walk in with bills).

Interest rates vary significantly from bank to bank — sometimes by a full percentage point or more. This means shopping around matters. A rate of 4.5% APY earns you much more than a rate of 3.5% APY on the same balance. Use a bank comparison website or call banks directly to see current rates, but remember that rates change frequently.

When comparing accounts, also check the minimum balance requirement, the withdrawal limit, and what counts as a withdrawal. A slightly lower interest rate at a bank with a lower minimum or higher withdrawal limit might be the better deal for your situation.

FDIC insurance and what it protects

Money market accounts are FDIC insured, which means the federal government guarantees your money up to $250,000 per account owner per bank. If the bank fails, you will not lose your deposits up to that limit. This protection applies whether the account pays interest or not.

The $250,000 limit applies per bank, not per account. If you have a money market account and a checking account at the same bank, they share the $250,000 protection. If you have accounts at two different banks, each bank's accounts are insured separately up to $250,000.

Credit unions offer similar protection through the National Credit Union Administration (NCUA), which insures deposits up to $250,000 per member per credit union.

Frequently Asked Questions

Can I use my debit card at any ATM with a money market account?

Most money market accounts come with a debit card that works at any ATM in the bank's network, and many banks are part of shared networks that include thousands of ATMs nationwide. However, using an ATM outside your bank's network usually costs a fee ($2 to $3). Check with your bank about which ATMs are free before you open the account.

What happens if I write a check that exceeds my withdrawal limit?

Checks typically count as withdrawals toward your monthly limit. If you exceed the limit, the bank charges a fee per excess check or may convert your account to a regular checking account. Some banks allow checks to be written without counting toward the limit — ask before you open the account if you plan to write checks regularly.

Can I move money between my money market account and my savings account without hitting the withdrawal limit?

This depends on the bank. Some banks count transfers between your own accounts toward the withdrawal limit, and some do not. Ask your bank specifically about transfers to your other accounts at the same bank before you open the account.

Is the interest rate may provide to stay the same?

No. Money market account interest rates are variable, meaning the bank can change them at any time. The rate you see when you open the account may be higher or lower next month. Banks typically notify you before they lower your rate, but you should check your rate periodically to see if it has changed.

Do I need a minimum balance to open the account, or only to earn interest?

This varies by bank. Some banks require you to deposit the minimum balance when you open the account. Others let you open the account with any amount but only pay interest if you maintain the minimum. Read the account agreement or ask the bank before you open the account.