Financial Fundamentals Blog

What Is a Money Market Account? Five Things To Know

Happy senior couple researching money market accounts on their tablet


If it’s time to take your savings plan up a notch, a money market account can get you closer to your goals by making your money work a little harder for you.


While you have many options to consider when selecting savings strategies, money market accounts stand out: They’re versatile, have convenient features and can come with compelling interest rates.


Wondering how to get started with this type of account? Here’s what you need to know. 


Kick Your Savings Into High Gear: What To Know About Money Market Accounts

Typically, when you’re assessing accounts for savings, savings accounts are the first options that come to mind. Money market accounts are a little different — and they could be an excellent addition to your financial health toolkit.


1. What Is a Money Market Account?

A money market account is an interest-bearing account that acts like a savings account, but which has some checking account features as well, such as check writing or debit card privileges. This type of account is ideal for short-term savings, rather than longer-term goals.


2. How Do Money Market Accounts Work?

By opening and using a money market account, you can earn interest on your account balance. Often, the interest rate you can get for a money market account is higher than that of a savings account.


One significant difference is the variability of the interest rate. For a money market account, the interest rate fluctuates as the market for highly liquid short-term debt securities rises and falls. (This is where the accounts get their name.)


To open a money market account, you’ll need a minimum initial deposit. Then, to keep your account active and enjoy earning interest, you’ll need to maintain a certain balance. Otherwise, you may risk account restrictions or fees.


3. The Pros and Cons of Money Market Accounts 

Opening these accounts can be helpful, but before you go further, you need to weigh the potential advantages and drawbacks. 


The pros of money market accounts include:

  • Higher interest rates.
  • Possible check-writing access.
  • Possible debit card privileges.

These perks can make a money market account financially compelling, flexible and accessible. However, these accounts can come with possible downsides. For example:

  • To open an account, you’ll need a sizable initial deposit.
  • You’ll need to commit to maintaining a required minimum balance.
  • These accounts aren’t ideal for long-term savings goals, such as retirement.
  • Depending on your financial institution, there may be transaction limits or restrictions on some card or check usage.

Before opening a money market account, it’s a good idea to talk with a financial advisor or a professional at your bank or credit union to determine whether this type of account is a good fit for you.


4. Money Market Accounts vs. Other Types of Accounts

How do money market accounts stack up — and when’s the best time to opt for this kind of account over another? Let’s take a quick look at money market accounts compared to other popular financial products.

Checking Accounts vs. Money Market Accounts

Money market accounts have check-writing and debit card privileges, but the amount of transactions you can perform within a month may be limited, unlike with checking accounts.


This is because some financial institutions still adhere to a former federal mandate, Regulation D, which limited the number of transactions for qualifying accounts — including money market accounts — to six or fewer per month.

Saving Accounts vs. Money Market Accounts 

Both savings accounts and money market accounts pay interest. This is good; earning interest can motivate you to keep saving.


However, there may be a higher balance requirement with a money market account than with a savings account.

Certificates of Deposit vs. Money Market Accounts 

A CD may offer a more competitive rate, but there is a flexibility tradeoff. With a money market account, your money will be more liquid.


5. How To Choose the Best Money Market Account for You

If you’re looking for the right money market account, it’s time to do some research. Carefully consider the following key factors before selecting your best-fit option:

  1. The annual percentage yield (APY), or the rate of return your account will earn in a year. You’ll want to see a higher APY.
  2. Any restrictions, such as caps on the number of transactions you can make per month or minimum balance requirements. 
  3. Any fees, such as maintenance fees, transaction fees or penalties for failing to maintain a minimum balance. 
  4. Access to funds, or how easily you can transfer or withdraw your money. This includes ATM access, check-writing capabilities and online transfers.

Evaluating and selecting for these factors can help you choose a money market account that will benefit you. If you’re ready to open a money market account, talk to a representative from our credit union today to learn more about how we can support you and your financial goals.