How Does A Money Market Account Work

What is a money market account? Full Understanding of MMA

Is there a way to earn a decent interest on my savings account? This is impossible with our traditional bank accounts offering less than a minimal interest. So, here is a real McCoy, a money market account. A money market account, or MMA, is a special savings account you can open at any bank or credit union. The silver lining of MMS is that it usually offers more interest on your savings than any traditional Bank. Regular savings accounts with less than $100,000 typically offer a minimal interest rate of just 0.06%. In contrast, money market accounts usually provide a more generous interest rate of 0.09% on the same amount. While this may not be considered a high rate, some top money market accounts offer impressive rates from 1.30% to 1.51% per year.

How does a money market account work? 

It is simply a savings account you can get from banks or credit unions. It is a financial product with a mix of savings and checking accounts. For example:

  1. Debit card: Some accounts offer debit cards that help you deposit and withdraw money using ATMs.

  2. Check writing and interest: They offer facilities for check writing and, most importantly, deliver you more goods than traditional saving accounts

    1. You must start depositing a certain amount to open a money market account. You must also maintain a minimum balance in the account; if you fall below that limit, you must dig into your pocket.
    2. There is a limit on how many transactions you can make each month, typically around six, similar to regular savings accounts.
    3. It's essential to remember that money market account rates can change according to market conditions. Some accounts may offer you a higher interest rate as a reward.
    4. The MMAs are good if you want to save for the short term to meet minimal financial needs like saving for a vacation or unexpected expenses.

How do you open a money market account? 

With the help of the steps given below, you can easily open a money market account.

  1. Choose the proper account: Choose a money market account that can fulfill your needs before opting for the one; check features like debit card interest rate and customer service. 

  2. Get your documents done: To open a bank account, you must show documents to prove your identity. Make sure you have the correct papers. The bank needs your personal information like your full name, address, social security number, and a government ID like a driver's license.

  3. Deposit amount: Deposit the minimum amount by depositing cash or transferring money from one account to MMA.

Advantages and Disadvantages of Money Market Account 


  1. Higher interest rates: The MMA rates are typically higher than regular saving accounts. This provides an opportunity for your money to grow faster in MMA.
  2. Check writing privilege: It is the unique feature of money market accounts that provide the opportunity to write checks. This gives you access to your funds, similar to checking amount.
  3. Debit cards: Some money market accounts come with debit cards, allowing you to make ATM withdrawals and purchases.
  4. Insurance protection: The money market accounts are a safe place to keep your hard-earned money because they are federally insured. If FDIC or NCUA insures your bank, your deposits are protected up to $250,000 per account holder, and joint accounts are insured up to $500,000.


  1. Limited transactions: The MMA restricts the number of transactions you can make monthly to around six. If you exceed the limit, you may face charges.

  2. Minimum balance requirement: You need to maintain a minimum balance in your MMA. The minimum requirement is often higher than the regular savings account. If you fail to maintain the balance, you may be charged fees, or your account might close.

How much money do I need to keep in a money market account? 

The requirement typically differs from bank to bank. Some banks may have low balance requirements and may not even charge fees. Some banks may ask you to maintain a higher minimum balance than saving or checking amount. You must maintain a minimum balance to avoid being charged extra fees. 

The Bank of America charges a $12 fee if you fail to maintain a minimum balance of $2,500.

Is it better to put money in savings or a money market account?

  1. If you want to make more money from your savings, pick a money market account. They give you more interest than regular savings accounts. In May 2022, the average interest rate for a money market account was about 0.08%, whereas a standard savings account only paid 0.07%. This shows that money market accounts generally offer slightly higher interest rates than savings accounts.

  2. It could be more exciting to go for MMA  when the overall economic interest rates are high. Money market accounts become a valuable choice because they invest in certificates of deposits, government security, and commercial papers, which regular savings accounts can't do.

  3. One drawback of a MMA  is that its interest rate can change depending on the economy. On the other hand, the interest calculation, whether done yearly, monthly, or even daily, can significantly impact if you have a large sum of money.

  4. Two more good things about choosing a money market account are that they typically provide you with a debit card and the ability to write checks, just like regular savings accounts. This makes it easy to handle your money in a money market account.

Can I withdraw all my money from a money market account?

Since Money market accounts are similar to savings accounts, they also allow you to withdraw all your money anytime. You can even close your MMA without incurring a penalty. MMAs are incredibly liquid and an excellent place to keep your emergency fund.

Final Words

We all want to save at least a modest amount from anywhere we can, and if we are offered the option to choose the best, we won't hesitate to do it. Well! MMA or money market accounts are the same options that provide us with the opportunity not to save but to earn a good interest compared to other options like saving accounts. Despite having a drawback of variable interest, they are the safest option to save for the short term. Like regular savings accounts, they also provide the benefit of debit cards. 


Can you lose money in a money market account?

MMAs are insured by the Federal Deposit Insurance Corp and National Credit Union Administration. They protect up to $250,000 if your financial institution fails to do so. Therefore, you won't lose your money if you keep them in a Money market account.

How high will money market rates go in 2023?

According to McBride, the estimated money market rates would be around 5.5%. By the end of the year, they would lower to around 5.25%.

Does a money market account have a monthly service charge? 

Many banks charge a monthly service fee. However, many others don't have a fee. For example, Ally Bank has no minimum balance or monthly fee to maintain a money market account.

What are the other options than MMAs?

High-yield checking accounts, Certificates of deposits, Credit union accounts, and Peer-to-peer lending services are available other than MMAs.

Who offers money market accounts?

 Only some banks offer money market accounts. The three banks that offer this service are Ally Bank, Bank of America, and CIT Bank. Even credit unions also offer money market accounts. 

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20 Nov, 2023


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