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What is a money market account?
A money market account (MMA) is a savings account that may also have debit card and check-writing privileges. The accounts typically limit the number of purchases and transfers to six each month. ATM withdrawals usually are not capped.
Traditionally, money market accounts often offered higher interest rates compared with regular savings accounts. But these days, rates are similar. However, many MMAs have higher minimum deposit or balance requirements than regular savings accounts.
Deposits are insured by the Federal Deposit Insurance Corp. at banks and the National Credit Union Administration at credit unions. Your money is protected, up to $250,000 per depositor, if the financial institution goes out of business.
» Want to compare rates? See our list of the best money market accounts
What are the pros and cons of money market accounts?
Is a money market account worth it? That depends. If you’re considering one, keep these pros and cons in mind.
Pros
Better rates than typical checking accounts and some savings accounts.
Safe place to keep a large chunk of money, protected by FDIC or NCUA insurance.
Easier access to funds than with traditional savings accounts because of debit card and check features, which might be helpful in an emergency.
Cons
Some institutions require high minimum balances to open an account or avoid fees.
Rates are lower compared with some high-yield savings accounts.
Access to money with checks and debit cards could encourage impulse spending, which might make it harder to save.
When to choose a money market account over a savings account
If your bank pays better or the same rate on its standard savings account as a money market account, and your goal is to park your funds and watch your bank balance grow, it might be worth sticking with the savings account. But if the money market’s rate is higher than the savings account, or you need to make an occasional purchase from the account, and you can meet any minimum balance requirement, it could be a good idea to open a money market account.
» Learn more about money market accounts compared to savings accounts
Compare money market accounts
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How to choose a money market account
Look for a money market account with a high interest rate and no monthly fee. The account should also have a low minimum balance — less than $1,000 is often attainable. Some institutions require $10,000 or more to earn the best rates or avoid a fee, while others have no minimum.
» Want to compare money market accounts in your area? See these money market options by region
Money market accounts vs. other accounts
Money market accounts have features that overlap with those of other bank accounts, but there are important differences. Consider how they compare with other savings accounts:
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| Interest rate: Competitive with savings accounts. May pay a better interest rate than a regular savings account. Typically offers the ability to write checks or make debit card purchases (may be limited to six times a month).
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| Interest rate: Competitive with money market accounts, but often lower than top CD rates. Usually has a lower minimum opening deposit and lower balance requirement than a money market account. High-yield savings accounts earn more than some money market accounts. Read more about high-interest savings accounts.
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Certificates of deposit (CDs) | Interest rate: Generally highest of all bank accounts, but money is inaccessible for fixed time periods. Earn interest on a chunk of money you won’t need for months or years. Get higher interest rates without the risk of investing in the equity markets. (Learn more about how timing and risk tolerance helps you determine where to put your money, and find the accounts with the best CD rates this month.)
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Money market accounts also have crucial differences from other types of bank accounts:
Money market fund: A money market account is not the same thing as a money market fund, which is an investment that could lose value if the market falls. Unlike money market funds, money market accounts are federally insured by the FDIC or NCUA.
Checking account: A money market account isn’t a checking account. MMAs may have check-writing and debit card features, but, as with regular savings accounts, they can be limited to six “convenient” transfers or withdrawals a month. That includes transactions by check, debit card swipe or online transfer. If you want to earn yields while also having the ability to write checks and make frequent withdrawals, you may be better off opening a checking account that earns interest. You can look for interest-bearing options in NerdWallet's list of best checking accounts.
» Want to learn more about investing in the stock market? Check out our guide for beginners.
FAQs
Currently, money market funds pay between 4.47% and 4.87% in interest. With that, you can earn between $447 to $487 in interest on $10,000 each year. Certificates of deposit (CDs). CDs are offered by financial institutions for set periods of time.
What is the downside of a money market account? ›
If you need to keep your money accessible and can meet the minimum balance requirement, then a money market account can help you build your savings. The only potential downside of money market accounts is that there are other types of accounts and investments that could earn a higher interest rate.
What is the money market account? ›
A money market account is a type of account offered by banks and credit unions. Like other deposit accounts, money market accounts are insured by the FDIC or NCUA, up to $250,000 held by the same owner or owners. Money market accounts tend to pay you higher interest rates than other types of savings accounts.
Is a money market account better than a savings account? ›
Savings accounts generally lack the minimum deposit and balance requirements many money market accounts have. However, money markets typically offer higher interest rates than regular savings accounts, letting you earn more on your saved money.
How much will $50,000 make in a money market account? ›
Money Market Account
Banks and credit unions offer money market accounts currently paying about 2%, which would produce $1,000 in interest on $50,000 over a year. Find the best current rates using SmartAsset's online money market account comparison tool.
Is it worth putting money in a money market account? ›
Because you earn higher interest rates than with a traditional savings account, a money market account can be a great choice to set aside some emergency cash or start building your savings. And unlike a traditional savings account, you have more options for withdrawing your money when you want it.
Can a money market fund lose money? ›
All investments are subject to market risk, including possible loss of principal. Retail Money Market Funds: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so.
How much money should you keep in a money market account? ›
Some money market accounts come with minimum account balances to be able to earn the higher rate of interest. Six to 12 months of living expenses are typically recommended for the amount of money that should be kept in cash in these types of accounts for unforeseen emergencies and life events.
Should I keep my savings in a money market account? ›
Medium-term goals: A money market account may be well-suited for medium-term goals because it requires a higher minimum balance and pays a higher yield. In addition, it's liquid enough that if you need to tap your funds earlier than you planned, there are no penalties for early withdrawals.
Is my money safe in a money market account? ›
Both money market accounts and money market funds are relatively safe, low-risk investments, but MMAs are insured up to $250,000 per depositor by the FDIC and money market funds aren't. Banks use money from MMAs to invest in stable, short-term securities with minimal risk that are liquid.
While MMAs are generally considered very low risk, you can lose money in these accounts under some circ*mstances. One way to lose money in a money market account is to incur more fees than the account earns in interest income.
Are CDs safer than money market funds? ›
CDs and money market accounts are equally safe. They are both insured accounts and will not lose value.
What is safer than a money market account? ›
Money market accounts and savings accounts are equally safe places for consumers to keep their savings. However, it's important to open accounts at banks that are covered by FDIC insurance. You can check if your bank is FDIC-insured here.
How much will 10k make in a high-yield savings account? ›
If you have $10,000 to invest, here's what your earnings would be at different interest rates: After one year with a regular account at 0.42%: $10,042.00. After one year with a high-yield account at 4.50%: $10,450.00. After one year with a high-yield account at 5.00%: $10,500.00.
How much money will I make on a money market account? ›
You will often find money market accounts that earn according to a balance tier. This simply means that your exact interest rate depends on your account balance, with higher balances usually earning at a higher rate. Average money market rates fall between 0.01% APY and 3.45% APY, again depending on your balance.
