A money market account is a type of savings account that typically offers a higher interest rate and lower fees than other savings accounts. The best of these accounts will allow you to grow your money quickly, often paying at a higher interest rate than you could expect from a traditional savings account.

What Is a Money Market Account?

A money market account is a savings account that typically offers a higher interest rate than other accounts. One of the key differences between these and traditional savings accounts is that they tend to have a higher minimum balance requirement. That means you have to open them with a more significant amount of money, and you will need to maintain a higher balance in the account over its lifetime. You still have easy access to your money, and many offer a debit card to allow this. Yet, if you drop below the minimum balance requirement, you may have to pay a fee, or the account may no longer pay at the high rate.

As an interest-bearing account, often available through a credit union or a bank, money market accounts are definite investment considerations for many people.

Here are some of the key features of money market accounts:

• Interest payments: Most money market accounts have a higher interest rate than traditional savings accounts. The interest rate can change over time, which means it can adjust based on market conditions. Interest rates also differ from one financial institution to the next.
• Debit cards: Unlike other high-interest savings options, money market accounts often provide debit cards to account holders. That means that you can use it like you would any other bank debit card, using it to make purchases or withdraw money from your account at an ATM.
• Checks: Most money market accounts offer check writing privileges. That means you can pay your bills out of those funds.
• Deposit balances: Many money market accounts will require the account holder to maintain a minimum balance in the account. It could be $1,000 or $10,000, and sometimes more. You will need to maintain that balance to obtain the higher interest rate.
• Fees: Some money market accounts may have some fees associated with them. Others do not have these. It is important to consider what these costs are before making the decision of which financial institution to use.

Each bank or credit union offering money market accounts sets the terms and conditions for these savings accounts. That is why it is important to compare options to determine the best solution for your needs.

When Should You Use a Money Market Account?

A money market account is likely a good option for those with a significant amount of money to put into a savings account and who want to earn as much interest as possible.

These savings accounts can be FDIC insured as bank accounts and NCUA-insured for credit union accounts, which means they are protected up to $250,000. That can give you some confidence that your funds will remain protected.

There are a couple of disadvantages associated with these accounts to keep in mind:

• These accounts may limit the number of transactions you can make out of them in any given statement period. That’s much like other types of savings accounts (and different from checking accounts).
• Fees are a key concern for many people. Learn what the fees are, if any, and when they apply. You may be able to eliminate the fee if you maintain a higher balance, for example.
• You’ll need to keep the minimum amount in the account to achieve the best benefits of these accounts.

Should you choose a money market or savings account?

A money market account could be suitable for those with a significant amount of money to put into the account and leave there. That allows you to earn a higher interest rate and grow your savings faster. However, money market accounts have fees if you drop below the required balance amount.

Key Money Market Account Terms

There are some key terms to consider when considering these accounts.

• Interest rate: This is the rate interest will be paid on the account if you leave the funds in the money market account for a year. It is often expressed as a percentage rate.
• Compounding: The money in the account will grow at a compounding rate, which means that you will earn interest on the initial deposit and all earnings over time.
• Money market funds: A money market fund, which should not be confused with a money market account, is a type of investment account that is based on the changes in mutual funds.

Evaluating Different Money Market Accounts

Before choosing where to open a money market account, remember a few things. As a consumer considering any of these accounts, compare several banks and credit unions to determine what they can offer you. Some key factors to keep in mind include the following:

• The amount of interest: This can range widely from one financial institution to the next. Some offer tiered interest rates associated with the minimum deposit maintained in the account.
• Debit cards: One of the benefits of money market accounts is being able to access the funds through a debit card, though not all accounts offer this.
• Fees: Determine what all of the fees on the account are throughout its lifetime of it, including fees associated with dropping below the balance required as well as fees for transactions.
• Check writing: If you want to write checks from your money market account, be sure that is a feature offered with the account.
• Insurance: Always choose an FDIC-insured or NCUA-insured account, as that helps to protect your money over time.

Money market accounts are an option for many people who want to maximize using a savings account. They could be the ideal tool if you have the funds to keep in them.