A money market account is a savings account that pays you more interest than a regular savings account, but requires you to keep a larger balance and limits how often you can withdraw money
Think of it as a middle ground between a regular savings account and a certificate of deposit (CD). With a regular savings account, your money is straightforward to access but earns very little interest. With a CD, you lock your money away for a set time period and earn more interest, but you pay a penalty if you take it out early. A money market account lets you earn more interest than savings while keeping some access to your cash — though not as much access as a regular account.
The bank pays you higher interest because you agree to two things: keep a minimum balance in the account (often $2,500 or more, though this varies by bank), and limit your withdrawals to a certain number per month (often six). In return, the interest rate is higher than what you would earn in a regular savings account.
Key Takeaways
- Money market accounts earn more interest than regular savings accounts because you keep a larger balance and make fewer withdrawals.
- Most banks require a minimum balance — often $2,500 to $10,000 — to open and maintain the account, though some banks have lower minimums.
- You can usually make up to six withdrawals per month before the bank charges a fee or closes the account.
- The interest rate on a money market account changes with the market, so your earnings go up and down over time.
- Money in a money market account is insured by the FDIC up to $250,000, the same as regular savings accounts.
How the interest rate works
The interest rate on a money market account is not fixed — it moves up and down based on what the Federal Reserve does with interest rates. When the Fed raises rates, your money market account rate usually goes up within a few weeks. When the Fed lowers rates, your rate goes down. This is different from a CD, where your rate is locked in for the entire time period.
Because rates change, the amount of interest you earn each month is different. One month you might earn $15 on a $5,000 balance; the next month, if rates drop, you might earn $12. Banks are required to tell you the current rate and the annual percentage yield (APY) before you open the account, but that rate is not a promise for the future.
The withdrawal limit and what happens if you exceed it
Federal rules allow you to make up to six withdrawals or transfers out of a money market account per month. This includes ATM withdrawals, checks you write, and transfers to another bank account. Deposits do not count toward this limit — you can deposit money as often as you want.
If you go over six withdrawals in a month, the bank can charge you a fee (often $25 to $35 per excess withdrawal) or close the account. Some banks are stricter than others — a few will close your account when ready if you exceed the limit even once. Before you open a money market account, ask the bank what happens if you go over the limit, because the penalty varies.
Minimum balance requirements and fees
Most banks require you to keep a minimum balance to earn the advertised interest rate. Common minimums are $2,500, $5,000, or $10,000, though some banks have lower minimums and some have higher ones. If your balance drops below the minimum, the bank may lower your interest rate to match a regular savings account, or charge you a monthly fee.
Beyond the minimum balance requirement, money market accounts may have other fees: a monthly maintenance fee (often $5 to $15), a fee for falling below the minimum, or a fee for excess withdrawals. Some banks waive these fees if you set up direct deposit or maintain a certain balance. Read the fee schedule before you open the account — fees can eat into the extra interest you earn.
When a money market account makes sense
A money market account works well if you have money you want to earn interest on but might need within the next year or two. For example, if you are saving for a down payment on a car or a home repair fund, a money market account lets you earn more than a regular savings account while keeping the money accessible if an emergency happens.
It does not work well if you need to withdraw money frequently or if you do not have enough to meet the minimum balance. It also does not work well if you want to lock in a rate for a long time — if you think rates are about to drop, a CD would protect you better.
Money market accounts versus other savings options
| Account Type | Interest Rate | Minimum Balance | Withdrawal Limit | Best For |
|---|---|---|---|---|
| Regular Savings Account | Very low | Often $0 to $500 | Unlimited | Money you need quick access to |
| Money Market Account | Moderate | Often $2,500 to $10,000 | Six per month | Money you want to earn interest on but may need within a year or two |
| Certificate of Deposit (CD) | Higher | Often $500 to $2,500 | None until maturity | Money you will not need for a set period (three months to five years) |
| High-Yield Savings Account | High | Often $0 to $500 | Unlimited | Money you want to earn interest on with unlimited access |
FDIC insurance and your money
Money in a money market account is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account holder per bank. This means if the bank fails, the government guarantees you will get your money back up to that limit. This protection applies whether your money is in a money market account, a regular savings account, or a checking account.
If you have more than $250,000 at one bank, only the first $250,000 is insured. If you want to insure more than that, you can open accounts at different banks, and each account gets its own $250,000 of protection.
Frequently Asked Questions
Can I write checks from a money market account?
Some banks let you write checks from a money market account, but each check counts as one of your six allowed withdrawals per month. Other banks do not allow checks at all. Ask your bank before you open the account if check-writing is available and whether it counts toward your withdrawal limit.
What happens if I need to withdraw money more than six times a month?
If you exceed six withdrawals, the bank can charge a fee per excess withdrawal or close the account. Some banks are more flexible than others. If you think you will need frequent access to your money, a regular savings account or high-yield savings account is a better choice.
Is the interest rate may provide?
No. The interest rate on a money market account changes whenever the bank decides to change it, usually in response to Federal Reserve rate changes. The rate you see when you open the account is not locked in. The bank must notify you before lowering your rate.
How is a money market account different from a money market fund?
A money market account is a bank account insured by the FDIC. A money market fund is an investment product sold by investment companies and brokerages, and it is not insured by the FDIC. They have similar names but work very differently. This article is about bank money market accounts.
Can I open a money market account if I have bad credit?
Most banks do not check your credit score to open a savings or money market account. They may check ChexSystems, a banking history database, to see if you have had problems with past accounts. If you have been denied a bank account before, ask the bank what their specific requirements are.