What is a money market account and how does it work?
January 26, 2026 – 6 mins
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What is a money market account?
A money market account is a type of interest-bearing deposit account offered by banks and credit unions. They’re FDIC-insured up to $250,000. This is not to be confused with money market mutual funds, which are investment products not insured by the FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration).
Money market accounts combine features of both savings and checking accounts, offering some transactional flexibility with a higher interest return.
How does a money market account work?
When you open a money market account, you deposit money into the account and earn interest, typically at a higher rate than traditional savings accounts. Interest is usually compounded daily and paid monthly. Money market interest rates are variable, which means that they may rise or fall depending on market conditions and your bank’s policies.
You can access your funds in a few ways—through checks, and electronic transfers depending on your bank or credit union. Keep in mind that many banks have monthly transaction limits, so you can’t withdraw your money as many times as you want.
Benefits of money market accounts
Money market accounts have a few perks that make them stand out from other savings accounts.
Higher interest rates: Money market accounts often pay better interest than traditional savings accounts, especially at online banks.
Liquidity: Unlike a certificate of deposit, you don’t have to lock down your money—you can access it relatively easily.
Safety: Money market accounts from banks are insured by the FDIC (up to $250,000 per depositor, per institution), and those at credit unions are insured by the NCUA.
Check-writing and debit access: Some accounts offer limited transaction tools, making them more flexible than traditional savings accounts.
Limitations of money market accounts
While money market accounts have some nice benefits, there are a few drawbacks to keep in mind before you open an account.
Minimum balance requirements: Some money market accounts require a minimum deposit to open the account (e.g., $1,000 or more) and may require you to maintain that balance to avoid fees.
Monthly withdrawal limits: Transactions such as transfers, checks, or debit payments may be limited to 6 per month. Additional withdrawals may lead to excessive withdrawal fees.
Potential fees: Account maintenance fees or penalties for falling below the minimum balance can cut into your savings.
Variable interest rates: Rates can rise or fall depending on market conditions, which means you might not always have the same rate and earn the same return.
Comparison to other savings products
Money Market Account vs Traditional Savings Account
A money market account typically offers lower interest rates than a traditional savings account due to having additional features, helping you earn more on your savings. Money market accounts also may come with check-writing and debit card privileges, while a traditional savings account typically does not.
Money Market Account vs High-Yield Savings Account
Money market accounts and high-yield savings accounts both typically offer competitive high interest rates, but money market accounts may include check-writing and debit access, while high-yield savings accounts are usually online-only with fewer transaction options.
Money Market Account vs Certificate of Deposit (CD)
A money market account stores your savings while giving you access to your money if you need it, and it typically earns variable interest. A certificate of deposit (CD) locks in a set term length and a fixed interest rate, and you may be penalized for withdrawing funds early.
Money Market Account vs Money Market Fund
Money market accounts are bank products that are insured by the FDIC—this means that your deposits are protected up to $250,000 in coverage for each depositor, insured bank, and ownership category. A money market fund is an investment product, so it is not FDIC-insured and carries some risk.
Who should consider a money market account?
Want to know if a money market account is right for you? You may be a good fit if you are:
- A saver with a larger balance who wants to earn higher interest and have the option to access your money when needed
- Someone who wants a safer, insured savings option compared to money market mutual funds or other riskier investments
- A saver who wants to store their emergency funds in a relatively liquid and stable account
How to choose the right money market account for you
Before you open a money market account with the first bank you find, do a little bit of research first to make the best decision for you and your savings goals.
- Compare APYs (Annual Percentage Yields) across banks: The higher the APY, the more you’ll earn on your savings. Pro tip: online banks often offer the best rates.
- Check for fees: Look for accounts with no monthly maintenance fees or reasonable waiver options. There’s no minimum balance requirement or monthly maintenance fees with a Sallie Mae® Money Market Account.
- Consider balance requirements: If applicable, make sure you can meet the minimum deposit needed to open the account and avoid fees.
- Review withdrawal rules: Find out if there are any limitations or penalties for excessive transactions.
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