A money market account is a hybrid — it has features of both, but works like neither

A money market account sits between a savings account and a checking account. It lets you write checks or use a debit card like a checking account does, but it pays interest on your balance like a savings account does. The catch is that banks limit how many times per month you can withdraw money, and they usually require a higher opening balance than either a regular savings or checking account.

Think of it this way: a checking account is built for spending. A savings account is built for holding money and earning interest. A money market account tries to do both, but the bank protects its interest rate by restricting how often you can take money out.

Key Takeaways

  • A money market account combines check-writing and debit card access with interest payments, but banks limit withdrawals to a set number per month.
  • Most money market accounts require a minimum opening balance of $2,500 to $25,000, depending on the bank, which is higher than typical checking or savings accounts.
  • The interest rate on a money market account changes with market conditions and is usually higher than a savings account but lower than a certificate of deposit.
  • If you exceed the withdrawal limit, the bank may charge a fee, convert your account to checking, or close the account entirely.
  • A money market account makes sense if you have money you want to earn interest on but also need occasional access to it without planning ahead.

How the withdrawal limit actually works

Federal rules once capped money market account withdrawals at six per month. Those rules changed in 2020, and now banks set their own limits. Most allow between six and ten withdrawals per month, though some allow unlimited withdrawals but charge a fee after a certain number.

The limit applies to transfers and automatic payments, not just checks you write. If you set up an automatic bill payment from your money market account, that counts toward your limit. ATM withdrawals usually count too. In-person withdrawals at a branch often do not count, so you can walk into the bank and take out cash without hitting the limit — but calling ahead to make sure is worth the time.

If you go over the limit, the bank's response varies. Some charge a fee per excess withdrawal. Others convert your account to a regular checking account, which means you lose the interest rate. A few close the account. Read your account agreement or call the bank to know what happens at your institution.

The minimum balance requirement and what it costs you

Money market accounts require more money upfront than checking or savings accounts. The minimum opening balance ranges from $2,500 to $25,000 depending on the bank. Some banks waive the minimum if you set up direct deposit or maintain a linked account with them.

Beyond the opening balance, many banks require you to keep a minimum balance at all times. If your balance drops below that threshold, you lose the interest rate, pay a monthly fee, or both. A few banks charge a fee if your balance falls below the minimum even for a single day. Check whether the minimum is a daily balance requirement or an average monthly balance — the difference matters if your paycheck arrives mid-month.

Online banks and credit unions often have lower minimums than brick-and-mortar banks, sometimes as low as $1,000 or even $500. If the minimum is a barrier for you, comparing online options is worth doing.

Interest rates and how they compare

A money market account pays interest, but the rate is not fixed. It changes when the Federal Reserve changes its benchmark interest rate, which happens several times a year. When rates go up, your rate goes up. When rates go down, your rate goes down.

The rate you get depends on the bank and the size of your balance. Larger balances often earn higher rates. Online banks typically offer higher rates than banks with physical branches because they have lower overhead costs. Credit unions sometimes offer competitive rates to their members.

Right now, money market account rates are higher than savings account rates at most banks, but lower than what you would earn in a certificate of deposit (CD) if you locked your money away for a set period. If you need your money to stay accessible, a money market account pays more than a savings account. If you can lock money away for six months or a year, a CD usually pays more.

When a money market account makes sense for you

A money market account works well if you have a chunk of money — at least $2,500 — that you want to earn interest on, but you also need to access it occasionally without planning ahead. For example, if you have an emergency fund that sits mostly untouched but you might need to tap it for a car repair or medical bill, a money market account earns you interest while keeping the money accessible.

It also works if you want to separate your spending money from your savings. You could keep your paycheck in a checking account and transfer money to a money market account to earn interest on what you are not spending this month. The withdrawal limit keeps you from treating it like a checking account, which helps you stick to the plan.

A money market account does not make sense if you need to withdraw money more than six to ten times a month, if you cannot meet the minimum balance, or if you have money you will not need for a year or more — in that case, a CD pays more interest.

How it differs from a savings account

A savings account lets you withdraw money as many times as you want (though some banks charge a fee after a certain number). A money market account limits withdrawals. A savings account usually has a lower minimum balance or no minimum at all. A money market account requires thousands of dollars to open.

Both pay interest, but money market accounts usually pay more because the withdrawal limit lets the bank lend out more of the money you deposit. A savings account is simpler — you deposit, earn interest, and withdraw whenever you need to. A money market account requires you to think about how many times you will need the money.

How it differs from a checking account

A checking account is designed for frequent transactions. You can write unlimited checks, use your debit card as many times as you want, and set up as many automatic payments as you need. Most checking accounts do not pay interest, or they pay very little. There is usually no minimum balance, or the minimum is low.

A money market account restricts how often you can move money out. It pays interest to reward you for leaving the money there. It requires a higher minimum balance. You get some of the convenience of a checking account — you can write checks and use a debit card — but not all of it.

Frequently Asked Questions

Can I use my money market account debit card as much as I want?

No. Debit card transactions count toward your monthly withdrawal limit, just like checks and transfers do. If your limit is six withdrawals per month and you use your debit card four times, you have two withdrawals left for the month. Some banks count each transaction separately; others count each day you use the card as one withdrawal.

What happens if I need my money before the month ends and I have used up my withdrawals?

You can usually walk into a branch and withdraw cash in person, which often does not count toward the limit. You can also transfer money to a linked checking account if the bank allows it without counting it as a withdrawal. Call your bank first to confirm what options are available and what counts toward your limit.

Do money market accounts have FDIC protection?

Yes. Money market accounts at banks are covered by FDIC insurance up to $250,000 per depositor, per bank. If you have money in a checking account and a money market account at the same bank, the $250,000 limit applies to your combined balances in those accounts. Money market accounts at credit unions are covered by NCUA insurance with the same $250,000 limit.

Is the interest rate may provide to stay the same?

No. The rate changes when the Federal Reserve changes its benchmark rate or when the bank decides to adjust its rates. You might see your rate go up or down several times a year. Some banks notify you by email when the rate changes; others post it on their website. Check your account regularly or set up alerts so you know what you are earning.

Can I open a money market account if I have bad credit?

Most banks do not check your credit score when you open a savings or money market account. They may check ChexSystems, which is a banking history report, to see if you have had problems with previous accounts. If you have been denied a bank account before, ask the bank what they check and whether you can still open an account with them.