# Money Market Account: How It Works and How It Differs From Other Bank Accounts

## What Is a Money Market Account (MMA)?

A money market account (MMA) is a type of bank account that earns interest and combines features of savings and checking accounts. Available at credit unions and banks, MMAs usually come with checks and a debit card but may limit the number of times you can withdraw money every month.

[Best High-Yield Savings Account Rates for October 2025: Earn 5.00% APY While You Still Can](https://www.investopedia.com/best-high-yield-savings-accounts-4770633)

MMAs have traditionally paid higher [annual percentage yields (APYs)](https://www.investopedia.com/terms/a/apy.asp) than standard savings accounts, though the [best high-yield savings accounts](https://www.investopedia.com/best-high-yield-savings-accounts-4770633) these days often meet or beat the rates of [the best MMAs](https://www.investopedia.com/best-money-market-accounts-5096917). But MMAs allow easier access to funds than savings accounts.

### Key Takeaways

*   Money market accounts (MMAs) have features of both savings and checking accounts.
*   MMAs may pay higher interest rates than regular savings accounts and they usually make it easier to pay for transactions with checks and debit cards. 
*   MMAs are best for short-term financial goals rather than long-term financial planning, like retirement. 
*   Other similar accounts to MMAs include high-yield savings accounts and certificates of deposit (CDs).

![Money Market Account (MMA)](https://www.investopedia.com/thmb/FHBOj1ILNdy7jwnPSodDGQ7dZSE=/1080x0/filters:no_upscale():max_bytes(150000):strip_icc()/TermDefinitions_Template_Moneymarketaccount.asp_final_3-fe436df30f424436870c41f5ebbf4e81.jpg)

*— Investopedia / Tara Anand*

## How Money Market Accounts (MMAs) Work

With money market accounts, you can make unlimited monthly deposits, but certain withdrawals like “convenient transactions” are usually limited to around six per month. These transfers include overdraft protection transfers, transfers made over the phone, and automatic or preauthorized transfers. 

> **Important**
>
> The frequency with which money market accounts compound interest (yearly, monthly, or daily) can significantly affect your return rate, especially if you have a high balance. Compounding intervals vary by bank; some, like Quontic Bank, compound daily, and others, like Capital One, compound monthly. 

Because MMAs come with check-writing and debit card privileges, you can easily use them to pay people, make purchases, or withdraw from ATMs. But these transactions count against any monthly withdrawal limits.

## Pros and Cons of Money Market Accounts

Cash in a money market account is easier to access and is insured by the [Federal Deposit Insurance Corp. (FDIC)](https://www.investopedia.com/terms/f/fdic.asp) or [National Credit Union Administration (NCUA)](https://www.investopedia.com/terms/n/ncua.asp) up to $250,000. However, drawbacks include fees and variable interest rates. Here’s a closer look at these and other advantages and disadvantages.

> **Tip**
>
> You can see if a bank is an FDIC or NCUA member by looking at its webpage footer for terms like “FDIC insured” or “Member FDIC” or by doing an online search.

Pros

*   Potentially higher APYs than savings accounts
    
*   Check-writing privileges
    
*   Debit cards
    
*   Insurance protection
    

Cons

*   Rate fluctuations
    
*   Transaction limits
    
*   Minimum balance requirements
    
*   Fees
    

### Pros Explained

*   **Higher APYs:** Money market accounts tend to pay a higher rate on average than a standard savings account. 
*   **Check-writing privileges:** You typically get a checkbook to use with your account, which allows you to write checks when desired, such as when paying rent or utility bills or making charitable donations. 
*   **Debit cards:** While you might not be able to use a [debit card](https://www.investopedia.com/terms/d/debitcard.asp) for every transaction, it’s still a convenient way to use your account’s money without the hassle of first making transfers to a checking account. 
*   **Insurance protection:** The FDIC and NCUA back your deposits up to $250,000 per depositor, per member bank, and per ownership category. Joint account limits increase protection to $500,000. 

> **Fast Fact**
>
> The FDIC and NCUA limits are across all accounts in the same ownership category at the same bank. So, the $250,000 limit includes your combined total in deposit accounts like MMAs, checking, savings, and CDs, but not other types of accounts like IRAs.

### Cons Explained

*   **Rate fluctuations:** APYs on money market accounts aren’t locked in like they are with [certificates of deposit (CDs)](https://www.investopedia.com/best-cd-rates-4770214). While you may pick an MMA account with a higher-than-average interest rate, because MMAs have [variable rates](https://www.investopedia.com/terms/v/variableinterestrate.asp), there’s no guarantee your rates will be as competitive even a month later. 
*   **Transaction limits:** The [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp) used to cap transfers and electronic payments from savings and money market accounts at six per month. While the restrictions were lifted in April 2020 in response to the pandemic, many banks still impose limits and regulations on using your MMA. Deposits, however, are usually unlimited.
*   **Minimum balance requirements:** Like other deposit accounts, your bank may require you to keep a minimum daily balance. Amounts vary by bank, but $2,500 is a common [minimum balance](https://www.investopedia.com/terms/m/minimum-balance.asp) requirement. Some banks require a [minimum deposit](https://www.investopedia.com/terms/m/minimum_deposit.asp) to establish your account. 
*   **Fees:** If your minimum balance dips below your bank’s threshold, you may have to pay a fee. [Overdraft](https://www.investopedia.com/terms/o/overdraft.asp) and excess withdrawal fees are common, though some banks don’t charge them or keep them reasonable, such as at $5 or $10 per excess withdrawal with a daily cap. 

## Money Market Accounts (MMAs) vs. Other Accounts

Savings accounts, checking accounts, CDs, and money market funds are the most common money market account alternatives. Here’s how they compare.

_\*Money market fund returns are measured in average annualized returns instead of annual percentage yields_

## Savings Accounts

Money market accounts are a [popular alternative to regular savings accounts](https://www.investopedia.com/ask/answers/012615/why-would-you-keep-funds-money-market-account-and-not-savings-account.asp) because they [offer higher interest rates](https://www.investopedia.com/put-25k-in-this-high-yield-account-and-earn-100-plus-a-month-just-1-easy-step-to-unlock-it-11784617). Bank savings accounts average 0.41% APY, while money market accounts average 0.64% APY. 

But don’t let the average APYs for MMAs fool you. The [best money market accounts](https://www.investopedia.com/best-money-market-accounts-5096917) often have much higher rates, sometimes over 5%, depending on market conditions. However, MMA rates are variable, so your account rates may rise and fall with the market.  

### High-Yield Savings Accounts

A high-yield or [high-interest savings account](https://www.investopedia.com/best-high-yield-savings-accounts-4770633) offers better-than-average APYs on deposits, sometimes several times higher than the national average. Because of this, they can be remarkably similar to MMAs, except for the lack of a debit card and checks. Interest rates may even be higher than MMAs at the same bank. 

## Checking Accounts

Regular checking accounts allow unlimited deposits and withdrawals. They also provide checks and debit cards, but their interest rates tend to be much lower than top MMAs. For reference, checking accounts average 0.07% APY, if they earn interest at all. Even the best checking accounts may not see rates hit 2% or more.

Checking accounts are also designed for daily use and have fewer transaction and withdrawal restrictions.  

### High-Yield/High-Interest Checking Accounts

[High-yield checking accounts](https://www.investopedia.com/high-yield-checking-account-8610476) are the same as regular ones, except with higher interest rates. Rates for the [best high-yield checking accounts](https://www.investopedia.com/best-high-yield-checking-accounts-5070332) can rival those of money market accounts, but these accounts sometimes require making a certain number of monthly debit card transactions to avoid fees. A money market account is better if your primary goal is to save and only occasionally spend.

### Rewards Checking Account

Rewards checking accounts offer benefits such as [sign-up bonuses](https://www.investopedia.com/the-best-checking-account-bonuses-8764477), better-than-average APYs, airline miles, cashback, and ATM fee reimbursements. However, like high-yield checking, they have a drawback: You must meet all the rules to get rewards.

## Certificate of Deposits (CDs)

A CD is a type of deposit account that locks up your money for a fixed period, commonly between one month and a few years but as many as 10 years. In exchange, you get a higher interest rate than a regular savings account. 

The downside is that unless your CD specifically states it’s a [no-penalty CD](https://www.investopedia.com/terms/l/liquid-certificate-of-deposit.asp), you’ll have to pay an [early withdrawal penalty](https://www.investopedia.com/cd-early-withdrawal-penalty-5225111) to access your money before it matures. Penalties start at seven days’ worth of interest and have no maximum. You’d also have to withdraw all of your money because partial withdrawals aren’t allowed. 

## Money Market Mutual Funds

Money market mutual funds, or money market funds, are investment accounts brokerage firms offer. They’re a type of mutual fund that is completely [different from the money market deposit account](https://www.investopedia.com/money-market-account-vs-money-market-fund-whats-the-difference-7557816) we’ve been describing. 

Money market mutual funds invest in low-risk vehicles like CDs, government securities, and commercial paper.  They also have the option of redeeming shares and may require checks to be over a specific dollar figure. 

Money market fund return rates tend to be higher than those of MMAs, but their biggest drawback is that they aren’t FDIC- or NCUA-insured.  

## The Bottom Line

Money market accounts are best for people who want better returns on their money than they would get with most savings accounts or who want an alternative savings vehicle for short-term goals like vacations and car down payments. Since [MMA money is more easily accessible](https://www.investopedia.com/ask/answers/061616/how-liquid-are-money-market-accounts.asp) than funds in other savings accounts, an MMA can also be great for rainy-day savings or an emergency fund. 

However, people who want to save for long-term goals like retirement would do much better with higher-paying investing accounts intended for those purposes, such as IRAs and 401(k)s.