A money market account is a hybrid between a savings account and a checking account, with interest rates that move based on what banks pay for short-term borrowing

A money market account (MMA) holds your money at a bank or credit union and pays you interest on the balance. The rate you earn changes over time—it is not fixed—because it tracks what the bank pays for short-term funds in the money market, the system where banks and large institutions lend to each other overnight or for a few weeks at a time. When those rates go up, your rate usually goes up. When they fall, yours falls too.

The account gives you some of the liquidity of a checking account—you can write checks or use a debit card to withdraw money—but with the interest earnings of a savings account. The tradeoff is that federal law limits you to six withdrawals per month (though this rule is enforced loosely now). You also need a higher opening balance than a typical savings account, often $2,500 to $25,000 depending on the bank.

Key Takeaways

  • Money market accounts pay interest that changes with market rates, so your earnings move up and down rather than staying fixed.
  • You can write checks and use a debit card, but federal rules cap withdrawals at six per month, though enforcement varies by institution.
  • Most money market accounts require a higher opening balance than savings accounts, typically between $2,500 and $25,000.
  • The interest rate you see advertised is the current rate only—it will change, sometimes monthly, based on what banks pay for short-term borrowing.

How the interest rate actually moves

The rate on your money market account is variable, meaning the bank can change it whenever it wants. In practice, most banks adjust rates monthly or quarterly, and they usually move in the same direction as the Federal Reserve's benchmark rate. When the Fed raises its target rate, banks raise what they pay on money market accounts. When the Fed cuts rates, banks cut what they pay you.

The bank publishes the new rate in writing before it takes effect, usually giving you at least a few days' notice. You do not have to do anything—the new rate straightforward applies to your balance on the effective date. If you do not like the new rate, you can close the account and move your money elsewhere, but there is no penalty for doing so (unlike a certificate of deposit, which charges you for early withdrawal).

Right now, money market account rates are higher than savings account rates at most banks, but that gap shrinks when the Fed cuts rates and widens when the Fed raises them. The exact rate you receive depends on the bank, your balance size, and whether you bank online or in person.

What you can do with the money

A money market account lets you access your cash in three ways: by writing a check, by using a debit card, or by transferring money electronically to another account. Not all banks offer all three options—some issue checks and debit cards, others offer only transfers and checks, and a few offer only transfers. Ask the bank which methods they support before you open the account.

Federal law says you can make no more than six withdrawals per month (including checks, debit card purchases, and transfers out). If you exceed six, the bank can charge a fee, close the account, or convert it to a savings account. In practice, many banks stopped enforcing this rule strictly during the pandemic and have not gone back to it, but the rule is still on the books and some institutions do enforce it. If you think you will need to withdraw money more than six times a month, a money market account is not the right tool.

Opening balance and minimum balance requirements

Most banks require you to deposit between $2,500 and $25,000 to open a money market account. Some online banks have lower minimums—as low as $1,000 or even $500. A few banks with physical branches require $50,000 or more. The minimum varies widely, so if you have a smaller amount to deposit, shop around before assuming you cannot open one.

Once the account is open, many banks require you to keep a minimum balance in the account at all times. If your balance falls below that minimum, the bank may charge a monthly fee (typically $10 to $25) or close the account. Some banks waive the minimum if you set up automatic deposits or keep a certain balance in other accounts at the same bank. Read the account agreement carefully to understand what the bank requires.

Money market accounts versus savings accounts and CDs

A savings account is simpler: it pays a fixed or variable rate, has no withdrawal limits, and usually requires a lower opening balance. You earn less interest than you would in a money market account, but you have more flexibility and fewer rules. A certificate of deposit (CD) locks your money away for a set period—three months, one year, five years—and pays a fixed rate that is usually higher than a money market account. If you withdraw before the term ends, you pay a penalty. A money market account sits between the two: more interest than savings, more access than a CD, but more rules than either.

Choose a money market account if you have a larger balance, want to earn more than a savings account pays, and do not need to withdraw money more than six times a month. Choose a savings account if you want simplicity and frequent access. Choose a CD if you know you will not need the money for a set period and want a may provide rate.

FDIC insurance and safety

Money market accounts at banks are covered by FDIC insurance up to $250,000 per account holder per bank. That means if the bank fails, the federal government guarantees your money up to that limit. If you have more than $250,000, only the first $250,000 is protected. At credit unions, the same protection comes from the NCUA (National Credit Union Administration).

The insurance covers the account itself, not the interest rate. Your balance is protected, but the rate you earn is not may provide—the bank can lower it at any time. This is different from a CD, where both the balance and the rate are locked in.

When a money market account makes sense

A money market account works well if you have $5,000 or more sitting in a regular savings account earning almost nothing, you do not need to withdraw it more than a few times a month, and you want a higher rate without locking the money away. It also works if you want to keep some cash accessible but separate from your checking account—a buffer or emergency fund that earns real interest.

A money market account does not make sense if you need to withdraw money frequently (more than six times a month), if you have less than $2,500 to deposit, or if you want a may provide rate that will not change. In those cases, a savings account or a CD is a better fit.

Frequently Asked Questions

Can I use a money market account like a checking account?

Partially. You can write checks and use a debit card if the bank offers those features, but you are limited to six withdrawals per month total. A checking account has no withdrawal limit, so if you need to access your money more often, use checking instead.

What happens if I withdraw more than six times in a month?

The bank can charge a fee (usually $10 to $25 per excess withdrawal), convert the account to a savings account, or close it. Enforcement varies—some banks are strict, others rarely enforce the rule. Check your account agreement or call the bank to understand their policy.

Is the interest rate I see may provide?

No. The rate shown is the current rate only. The bank can change it at any time, usually monthly or quarterly. You will receive written notice before the change takes effect, and you can close the account without penalty if you do not like the new rate.

How is a money market account different from a money market fund?

A money market account is a bank product covered by FDIC insurance. A money market fund is an investment product sold by brokerages and mutual fund companies, not insured, and carries different risks. They are separate things despite the similar name.

What if my balance drops below the minimum?

The bank will usually charge a monthly fee ($10 to $25) or close the account. Some banks waive the minimum if you maintain a certain balance in other accounts or set up automatic deposits. Read your account agreement or ask the bank about their specific policy.