Advantages and Disadvantages of a Money Market Account

MMA Pros

  • You can earn interest on the cash you keep in the account.
  • Your money is safe because it's insured by the FDIC. If you get a MMA with a credit union by the NCUA.
  • Your money is easy to access and you can make withdrawals at any time. Some MMA even provide a debit card.
  • You can write checks from your MMA.

MMA Cons

  • Interest rates with some MMA might be temporary introductory rates and may drop after one month. Always check the permanent rate.
  • MMA can have high minimum balance requirements.
  • While your cash is accessible, there is a limit to the number of transactions you can make (typically 6 per month). It normally takes 2-3 days to transfer funds to/from an MMA.
  • MMA only earns interest on the balance you keep in the account. If you don't plan on saving, it's not a good account for you.
National Rate on Non-Jumbo Deposits
  • Money Market (less than $100,000)

What Is a Money Market Account?

A money market account (MMA) is a type of savings account with a few unique features like being able to write a check. The most important thing to know about a money market account is that it’s a safe and accessible place to store your money while earning interest.

What Are the Advantages and Disadvantages of a Money Market Account?

If you’re considering a money market account as a place to store your savings, be sure to weigh the pros and cons: 

MMA ProsMMA Cons

You can earn interest on the cash you keep in the account.

Interest rates with some MMA might be temporary introductory rates and may drop after one month. Always check the permanent rate.

Your money is safe because it's insured by the FDIC. If you get a MMA with a credit union by the NCUA.

MMA can have high minimum balance requirements.

Your money is easy to access and you can make withdrawals at any time. Some MMA even provide a debit card.

While your cash is accessible, there is a limit to the number of transactions you can make (typically 6 per month). It normally takes 2-3 days to transfer funds to/from an MMA.

You can write checks from your MMA.

MMA only earns interest on the balance you keep in the account. If you don't plan on saving, it's not a good account for you.

Can You Lose Money in a Money Market Account?

No, you can’t lose money in your money market account. Because it’s insured, your money is protected, even if your bank fails. 

Note: Money market accounts should not be confused with money market funds. Money market funds are investments which are not FDIC insured and have a risk of principal loss due to the nature of their investments.

The Best Money Market Rates for 2021

Banks and credit unions offer competitive interest rates for money market accounts. This is good news for savers because you have so many promising options. 

To find the best online money market rates near you, you can use the tool below. 

 

Money Market Calculator

If you’re looking at a list of interest rates for a money market account – and want to estimate your growth over time –  use the simple calculator below. 

 

Remember that money market account interest rates aren’t fixed. This means they can change in the future by going up and down. If the interest rate drops significantly with your account, it might be time to look into moving your savings to another MMA offering a higher rate.

Money Market vs. Savings Accounts

Both money market and savings accounts are great places to keep your emergency funds or the money for your next big purchase. In the table below, we’ve compared money market accounts and savings accounts so you can make a more informed decision for where to keep your cash:

FeatureMoney Market AccountBank Savings Account
Interest RatesMedium to HighLow
Insured byFDIC or NCUAFDIC or NCUA
Withdrawal LimitsYes a max of 6 per monthYes a max of 6 per month
Debit Card AccessYes, depending on the bankYes
Minimum Deposit RequirementsHighLow

Key Takeaway for Savings vs. Money Market Accounts

Savings and money market accounts are equally accessible (in terms of number of transactions per month), but typical bank savings accounts can be accessed more quickly/easily.

A savings account is more accessible, however, since it’s attached to a debit card and has a low deposit requirement. This is a great option if you’re saving money for the first time. 

Money market accounts can offer higher interest rates, which might mean higher returns. But it also requires that you have more money to fund the account. If you have a chunk of money sitting in regular savings, it’s a good idea to consider an MMA to start earning more interest.

Money Market vs CD

A certificate of deposit (or CD) is another common place to put money away for savings. A CD is a bound deposit, which is kind of like putting a lock on your money. You agree to give the bank your money for a specific period of time, and in return, you are paid a certain interest rate. 

In the table below, we compare the main features of these accounts to help you decide which account might be a better choice for you:  

Feature

Money Market Account

CD

Interest Rates

Medium-to-high but variable

Slightly higher fixed interest rates, depending on the term.

Access to Funds

Check writing and 6 withdrawals per month

No access without paying an early withdrawal penalty.

Insured by

FDIC or NCUA

FDIC or NCUA

Key Takeaway for CD vs. Money Market

If you’re saving money for a house (or even future college tuition), you might consider a CD over an MMA. That’s because a CD will typically offer higher returns. The only catch is that you can’t access the funds (without penalty) for a specific period of time.

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Ask an Expert
All of our content is verified for accuracy by Mark Herman, CFP and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Money Market Accounts & How to Find the Best Rates.

Are Money Market Accounts FDIC Insured?

Yes, money market accounts are insured by the FDIC. Just like savings accounts, your money is protected up to $250,000 per account type and per account holder. If you have a money market account with a credit union, it will be insured by the NCUA instead.

Are Money Market Accounts Liquid?

Yes, money market accounts are considered liquid assets and the money in the account is not tied up in any investments. You can easily make withdrawals of the money in an MMA, though they’re subject to any restrictions for withdrawing recent deposits and also note that transfers from online high-yield savings accounts normally take 2-3 business days to process.

Are MMAs the same as online high-yield savings accounts?

Yes, for practical purposes. That said, money market accounts normally offer the ability to write checks whereas online savings accounts do not. The most competitive money market accounts are normally found at online banks since they are able to pass better rates on to the consumer due to lower overhead costs. Money market accounts and online high-yield savings accounts are excellent places to keep an emergency fund, which experts normally recommend should be able to cover 3-6 months of expenses.

Mark Herman has been helping friends with financial questions since serving as an Army helicopter pilot. Since then, he’s gained valuable experience in the corporate world before moving on to become a Certified Financial Planner™.

If you have a question about Money Market Accounts & How to Find the Best Rates, then please ask Mark.

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All of the opinions expressed herein are the author's alone, and not those of any bank, brokerage, credit card issuer, lender, insurance company, outside financial institution, or any other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post or any other third parties.