Money market account

What It Means

A money market account, also called a money market deposit account, is a deposit account at a bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more that works much like savings. The CFPB says it may pay a higher rate than regular savings, tends to need a bigger opening deposit and balance, and can pay a different rate on different balance tiers. Many come with checks or a debit card, which is why FINRA describes them as combining features of savings and checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more. It's a separate product from a money market fundMoney market fundA type of mutual fund that invests in cash and short-term, high-quality debt, often aiming for a steady $1.00 share price, with no FDIC insurance. See more, which is an investment with no FDIC insurance.

How It Sounds at Home

• "I keep the house fund in a money market account."
• "You need ten grand in there to get the better rate."
• "Is that a money market account or a money market fund?"

The Breakdown

Worked example. Priya moves $18,000 from checking into a money market account whose rates, as an example, step up by balance:

Her balance sits in the middle tier, so it earns 2.00%, about $360 over a year if the rate holds. Adding $7,000 would lift the whole balance to $25,000 and the top example tier, where it would earn $750 a year.

What the result means. Tiers reward a larger balance, and some accounts also set a higher minimum to open or to avoid a monthly fee. Check the account disclosure for the tier cutoffs and how the bank applies them before you move money to chase the next one.

Money market account or money market fund

Good to Know

The FDIC lists money market deposit accounts among the deposits it insures, up to $250,000 per depositor, per insured bank, for each ownership category. A money market fund is a different product: the SEC's investor bulletin on money market funds calls it a type of mutual fund, and the FDIC doesn't insure mutual funds even when a bank sells them. On withdrawals, the Federal Reserve dropped Regulation D's six-per-month transfer limit on April 24, 2020, but banks may keep their own caps or fees, so read the account agreement. The CFPB notes that money market accounts can carry a monthly maintenance feeMonthly maintenance feeA charge a bank or credit union takes each month for keeping a checking, savings or money market account open, often waived if you meet set conditions. See more too.

Related Terms and Categories

• Savings account

  A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

• Money market fund

  A type of mutual fund that invests in cash and short-term, high-quality debt, often aiming for a steady $1.00 share price, with no FDIC insurance.

• High-yield savings account

  A savings account paying a variable interest rate that's generally higher than a traditional savings account's, often offered by online banks.

• Certificate of deposit

  A deposit you agree to leave at a bank or credit union for a set term, until its maturity date, usually with a penalty for taking money out early.

• APY

  A yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules.

Household money and budgeting