The One-Minute Guide to Money Market Accounts

Perhaps you have funds in a money market account at your bank or credit union. If you had to describe that account in 60 seconds, here are your cue cards:

A money market account
may pay higher interest
rates than a traditional
savings account.

  • My money market account is federally insured, like a savings account.
  • My money market account may pay higher interest rates than a traditional savings account. But these higher rates often mean that money market accounts have higher balance requirements than a savings account.
  • Different interest rates may apply to different account balances. For example, there may be one rate for balances below $10,000, a higher rate for balances between $10,000 and $25,000, and an even higher rate for $25,000 and above.
  • My money market account lets me write a limited number of checks each month. In essence, it combines features of savings and checking accounts. (The ceiling is usually three checks—a restriction imposed by Federal Reserve Regulation D.) If I exceed the limit, the bank won't process any new transactions until the next period.
  • But I can make as many withdrawals as I want by visiting my bank or credit union in person, and I can deposit that money into my checking account without penalty.
  • As for how I plan to use my money market account, I'm keeping my options open. I can use it as an emergency fund, or to save money I intend to invest until I've accumulated enough to make a particular purchase. It's a safe place for funds I might need at any time.