What Is a Money Market Account?

Summary

• A money market account (MMA) is an interest-earning deposit account that combines features of savings and checking accounts.
• MMAs often provide convenient ways to access your money, but account rules and transaction limits can vary by financial institution.
• These accounts may require a larger opening deposit or minimum balance than a traditional savings account.
• A money market account is different from a money market fund, which is an investment and can lose value.

A money market account can offer a balance between earning interest and keeping your money accessible. Understanding how it compares with a savings account, checking account and certificate of deposit (CD) can help you decide whether it fits your savings needs.

How Does a Money Market Account Work?

A money market account, or MMA, is a deposit account offered by banks and credit unions. Like a savings account, it earns interest on the money you deposit. It may also offer some of the convenient access features associated with a checking account.

MMAs often pay higher interest rates than traditional savings accounts. That can make them appealing when you want your savings to earn interest without committing the money to a set term.

How Can You Access Money in an MMA?

Depending on the financial institution and account, a money market account may provide checks, a debit card or ATM access. These features can make it easier to reach your savings when you need them.

That flexibility does not necessarily mean an MMA should be used like an everyday checking account. Financial institutions may place limits on certain transfers, payments or other transactions, and additional transactions may result in fees or penalties. Review the account terms so you understand how and when you can access your money.

What Balance Requirements Should You Expect?

Money market accounts often have higher balance requirements than traditional savings accounts. You may need a larger initial deposit to open the account, and the institution may require you to maintain a minimum balance to avoid fees.

Before opening an MMA, compare the interest rate, opening deposit, minimum balance requirements, fees and access options. An account with attractive earning potential may be less useful if its requirements do not fit the way you plan to save or use the money.

Money Market Account vs. Money Market Fund

Despite their similar names, a money market account and a money market fund are different financial products.

A money market account is a deposit account at a bank or credit union. A money market fund is a type of mutual fund that pools money from investors and generally invests in short-term, relatively low-risk investments. Investors buy shares of the fund, and the value of those shares can change.

That distinction matters because money invested in a money market fund can lose value. When comparing options, make sure you know whether you are considering a deposit account or an investment.

Is a Money Market Account Right for You?

A money market account may be worth considering if you want to earn interest while keeping your savings relatively accessible and you can meet the account's balance requirements. Compare the account's interest rate, fees, minimums and access rules with other savings options before deciding.

The right choice depends on how much you plan to save, how often you expect to access the money and what account requirements work for you.