Money market accounts: Savings accounts with easy access

What is a money market account? 

A money market account is a type of deposit account offered by banks and credit unions. Like a traditional savings account, money market accounts—also called money market deposit accounts or money market savings accounts—can help you grow your savings over time. 

Money market accounts often come with debit cards or checkbooks, allowing you to withdraw funds easily when needed. In the past, the Federal Reserve limited the number of times consumers could withdraw funds from a money market to six times per month. But the agency lifted these restrictions in 2020 because of the COVID-19 pandemic. Just keep in mind that financial institutions can still enforce their own six-withdrawal rule if they so choose, although they’re no longer required to. 

Funds in a money market account are protected by the Federal Deposit Insurance Corporation (FDIC) at banks and the National Credit Union Administration (NCUA) at credit unions. The standard FDIC deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. Similarly, the standard NCUA share insurance coverage is $250,000 per share owner, per insured credit union, for each account ownership category. So if your financial institution goes out of business, the FDIC or NCUA will reimburse you the money lost up to that coverage amount.

Pros and cons of money market accounts 

A money market account is just one of many options you have for storing cash, so it’s important to consider both the pros and cons of these accounts before opening one yourself. 

Money market vs. savings accounts 

Money market accounts are sometimes called “money market savings accounts,” so they’re not too different from what a traditional or high-yield savings account has to offer. The main difference between MMAs and savings accounts is that money market accounts let you access your funds very easily—and often by debit card or checkbook, while typical savings accounts do not.

“Think of a money market account as a blend of a savings and checking account,” says David Johnston, a certified financial planner and managing partner at Amwell Ridge Wealth Management. “They’re liquid, earn interest, have check writing and/or debit card privileges, and are FDIC-insured.”

And as mentioned before, many money market accounts also have minimum balance requirements and may offer higher interest rates, at least on larger balances. Since money market and saving account offerings vary by bank and credit union, so it’s important to compare several options before opening yours. This will help you get the best interest rates and lowest fees possible.

Alternatives to money market accounts 

In addition to money market accounts, you can also explore traditional savings accounts or online savings accounts. 

These alternatives may also be an option:

• High-yield savings accounts: These are a type of savings account that offers higher interest rates than your typical savings accounts do. Banks and credit unions offer them, and they often have a minimum balance requirement, much like money market accounts. These can be a good alternative if you want a high interest rate but also don’t want the temptation of easy access to your funds. Most high-yield savings accounts have limits as to how many transfers you can make.
• Certificates of deposit (CDs): Certificates of Deposit are a type of savings tool that banks and credit unions offer. They require an upfront payment and offer a guaranteed return on your investment, but not until a certain date—usually six months to five years down the road. Unlike with a savings account, you won’t have constant access to your money with these products and can only get it back once the CD reaches maturity (or else face a penalty). CDs often have higher interest rates than money market accounts, so if you want to maximize your earnings and don’t need the funds for a while, they could be a smart alternative.
• Health savings accounts (HSAs): Health savings accounts are a kind of savings account designated specifically for health and medical costs you might incur. You fund them with pre-tax money, and the funds earn interest over time. You can use the money as needed for eligible medical expenses (the IRS sets these). An HSA might be a good idea if you or a family member have a chronic health condition or if you have a high-deductible health insurance plan and want help covering the costs of meeting your deductible. 
• Individual Retirement Accounts (IRAs): An Individual Retirement Account is a type of tax-advantaged account you can use to save for retirement. You get these through banks and brokerages, and there are many types, including Traditional IRAs, SEP IRAs, and Roth IRAs. Once you fund your IRA, you can invest in mutual funds, stocks, real estate, and other investment vehicles in hopes of growing your retirement savings. IRAs can may be a good alternative to money market accounts if you’re specifically looking to save for retirement and you’re willing to take on some risk for potentially higher growth.

There may be other alternatives to explore, too. Consult a financial professional if you need help determining which savings vehicle is best for your goals.

How to find the best money market account 

If you do choose to open a money market account, make sure to shop around. 

“Not all money market accounts are the same,”  says Charles Krawitz, chief capital markets officer at Alliant Credit Union. “Look closely at the balance requirements, interest

rates being offered, fees charged, ease of access, and transactional limits. All accounts should be evaluated on their individual merits.”  

There are many factors to look at when comparing money market account options, including:

• Interest rate: You’ll want to note the interest rate on each account and the APY, which is how much interest your account will earn across a one-year period. You should also look at how often interest compounds. Some accounts are daily, monthly, quarterly, or annually. This can impact your earning potential as well. 
• Account minimums: With many money market accounts, you must have a minimum balance to open the account, and there may also be minimums for keeping your interest rate. In some cases, you may owe an additional monthly fee if your balance falls below a certain threshold.
• Fees: Fees can eat into your earning potential, so check for any maintenance fees, withdrawal fees, or other charges you may be hit with.
• Withdrawal rules: How many withdrawals can you make per month? You’ll also want to note how those withdrawals are to be made. Do you get a debit card? Can you withdraw at an ATM? Be sure to note any withdrawal fees, too.

When comparing your options, always consider a variety of institutions, including traditional brick-and-mortar banks, online banks, and credit unions. These top-rated money market accounts are a good place to start shopping. You can also check with your home bank and any credit unions in your area.

The takeaway 

Money market accounts allow you to earn interest and grow your savings while also ensuring you have easy access to your money if you need it.

But these accounts aren’t your only option for stowing away cash. In many cases, a combination of accounts and financial products is the best way to meet your long-term financial goals. 

If you’re not sure which accounts are right for you, consider consulting a financial planner or investment professional. They can help you choose the right solutions for your finances.