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How does a money market account work?

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A money market account is a financial product offered by many banks and credit unions that allows you to safely store your funds while earning some interest. Money market accounts combine some features of checking and savings accounts.

How do money market accounts work?

Money market accounts are similar to savings accounts, but they have some transactional features like checking accounts. For example, a money market account may come with a debit card and checks. Money deposited into a money market account earns interest — an advantage over standard checking accounts, which typically don’t accrue interest on the account balance.

Some money market accounts require a minimum deposit to open and may charge a fee if the balance falls below a specified minimum. Money can be added or withdrawn to a money market account, but depending on the bank or credit union, there may be a limit on the number of transactions permitted each statement period — typically six, the same as savings accounts.

Money market accounts pay a variable interest rate, so the rate consumers earn on their money can fluctuate over time. It’s common for these accounts to have tiered rates, meaning higher balances are rewarded with a higher annual percentage yield (APY). Money market accounts tend to offer higher yields than typical savings accounts.

What are the advantages of money market accounts?

  • The money you place in a money market account is insured up to $250,000 per account owner and $500,000 for joint accounts at banks and credit unions that are federally insured.
  • Money market accounts pay competitive interest rates. Take a look at the best money market accounts to see the current rates.
  • Money market accounts can come with a debit card and/or checks, providing more ways to access cash than a savings account.

What are the disadvantages of money market accounts?

  • A money market account typically requires a considerably larger deposit than a savings account. Frequently, accounts require $1,000 or more.
  • Due to a federal rule A federal banking rule, known as Regulation D, historically limited withdrawals and transfers to six each statement cycle. The rule was revised in 2020 to eliminate the six-withdrawal limit, but some banks still impose it on money market (and savings) accounts, giving money market accounts less flexibility than standard checking accounts.
  • Although money market accounts can often offer a higher yield than a savings account, they don’t always. Be sure to shop around and compare options.

Who should have a money market account?

Money market accounts are best for those saving for short-term goals. For example, if you’re building an emergency fund, A money market account could be a good place to store that cash. But if you are saving for retirement, then a CD would be a better fit.

“A money market can be appropriate for money you don’t need right away, but is also not appropriate for a long-term need you might invest for,” says Charles H. Thomas III, CFP, founder of Intrepid Eagle Finance. “Something like an emergency fund or rainy day fund could be an appropriate use for a money market.”

Can you lose money in a money market account?

You won’t lose money in a money market account if you work with a financial institution that is federally insured. The Federal Deposit Insurance Corp. and National Credit Union Administration insure money market and other accounts up to $250,000, so they’re protected should a financial institution fail.

Bottom line

Though money market accounts and savings accounts both have withdrawal limits, money market accounts have some small differences that give them some more flexibility in terms of access to money. They usually come with checks and/or a debit card.

Money market accounts tend to have high APYs, as well, but they may also have higher fees and minimum requirements than checking or savings accounts. It’s worth reviewing some different money market account options to find the best APYs and lower fees.

–Freelance writer Sarah Sharkey contributed to a previous version of this article.

Written by
René Bennett
Banking writer
René Bennett is a writer for Bankrate, reporting on banking products and personal finance.
Edited by
Wealth editor
Reviewed by
Founder of Financial Staples
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Part of  Introduction to Money Market Accounts