What Is Money Market Account?
A money market account combines features of savings and checking accounts, often with higher rates and check-writing ability. Learn how they work.
Definition
A money market account (MMA) is a deposit account at a bank or credit union that typically pays higher interest than a regular savings account and offers some checking account features like check-writing and debit card access. Like savings accounts, MMAs are FDIC insured up to $250,000.
Money market accounts often have higher minimum balance requirements ($1,000-$10,000+) than regular savings accounts, and some charge fees if the balance falls below the minimum. Interest rates are competitive with high-yield savings accounts, though the rates vary by institution and can change with market conditions.
Do not confuse a money market account with a money market fund. A money market account is a bank deposit product (FDIC insured). A money market fund is an investment product (not FDIC insured) that invests in short-term, low-risk securities like Treasury bills and commercial paper. They serve similar purposes but have different risk profiles.
Real-World Example
You want a place to park $25,000 in house-down-payment savings. A money market account paying 4.2% APY gives you $1,050 in annual interest, plus the ability to write checks or use a debit card if you find a house sooner than expected. You get nearly the same return as a high-yield savings account but with more flexible access to your money.
Why It Matters
Money market accounts are a solid option for larger cash balances where you want both competitive interest and convenient access. They are particularly useful for savings goals with uncertain timelines -- you do not know exactly when you will need the money, so the check-writing ability provides flexibility. For smaller balances, a high-yield savings account with no minimum balance requirement may be a better fit.
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Frequently Asked Questions
What is the difference between a money market account and a savings account?
Money market accounts typically offer higher interest rates, higher minimum balance requirements, and check-writing or debit card access. Savings accounts are simpler with lower minimums but usually no check-writing ability.
Are money market accounts FDIC insured?
Yes, money market accounts at banks are FDIC insured up to $250,000 per depositor. This is different from money market funds (mutual funds), which are NOT FDIC insured.
What minimum balance do money market accounts require?
Minimums vary by institution, typically from $1,000 to $10,000. Some online banks have no minimum. Below the minimum, you may be charged a monthly fee or earn a lower interest rate.
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