A money market account is a bank account that functions similar to both a checking and a savings account, so you get the benefits of both options.
Money market accounts often bear interest at a much higher rate than average checking or savings accounts, similar to rates you’ll find with a high-yield savings account. Unlike a savings account, though, they often give you access to your funds with checks or a debit card, so you can make ATM withdrawals when you need cash. Many money market accounts come with the same withdrawal restrictions as savings accounts, though, so they’re not designed for everyday spending like checking accounts are.
Because they’re bank accounts and not investment accounts, money market accounts are usually FDIC1 or NCUA2 insured under your banking institution. That makes them a way to potentially earn returns on your savings with a much lower risk than investing them in the stock market.
Benefits of a Money Market Account
Many people who use a money market account also have checking, savings and investment accounts for various financial goals. But money market accounts offer some unique benefits that could make you want to incorporate them into your financial strategy.
- Liquidity: Your funds are easily and quickly accessible via withdrawal at the bank, ATM or with a check.
- High interest: The average money market account pays interest at just over seven times the rate of the average checking account, according to the FDIC report. And some banks pay well above average. Quontic’s Money Market Account3 lets you earn 3.00% APY (annual percentage yield), over 10 times the national average. (That rate is variable; keep an eye on our money market page for the current rate.)
- Low-risk: Your money in a money market account is usually FDIC insured1 up to $250,000, just like funds in your checking and savings accounts. (If you’re working with a credit union, look instead for NCUA insurance2.) Your interest rate can fluctuate with the economy, but your savings balance won’t plummet when the stock market dips.
All of these benefits make a money market account a wise addition to your financial plan for short- and medium-term goals.
Who Should Use a Money Market Account?
Here are four key reasons to open a money market account:
1. Building an Emergency Fund
Keeping cash on hand to cover unexpected expenses and maintain your lifestyle in case of unplanned loss of income is vital to your financial stability. And, because you don’t know when — if ever — you’ll need to spend from your emergency fund, it’s smart to keep it in an interest-bearing account. Let it work for you while you don’t need it!
A money market account may be a better place to keep your emergency fund than a savings account, because you can access the funds with a debit card instead of going to the bank for cash or transferring to a different account. Just swipe your card within the monthly limit, and roll with the punches.
2. Saving to Spend in the Near Future
Because of tax incentives, retirement savings accounts are the best place for your long-term savings. But you only see the benefit of those savings over the long term, and you face penalties if you pull funds before retirement age.
A money market account could be the perfect place for your short-term savings for things like weddings, vacations and a home down payment. You can earn steady interest and withdraw the money whenever you’re ready to spend it.
3. Align with Your Risk Tolerance
Concerned about subjecting too much of your money to the whims of the stock market? You might have a low tolerance for financial risk.
A money market account is a way to build your savings and take advantage of compound interest without the volatility you might experience in an investment portfolio
4. Complement a Checking and Savings Account
A checking account is important for everyday spending, and a savings account can help your rainy day fund grow without the temptation to spend it. A money market account offers a good balance between the two — interest-bearing savings with easy access via a debit card or checkbook. That makes it a great fit for savings that’s earmarked for specific expenses in the short term.
How to Open a Money Market Account
Ready to add a money market account to your suite of financial tools? Here’s how to get started:
- Visit our money market page to open an account online in just a few minutes.
- Click “get started” to open an account with a minimum deposit of $100.
- Earn 3.00% APY on your daily balance, and pay no service fees as long as you make six or fewer withdrawals per month.
1FDIC insurance is applicable to eligible deposit accounts and up to the maximum allowed by law . Learn more at https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/index.html.
2Learn more about NCUA insured accounts, which are applicable to eligible accounts and up to the maximum allowed. https://www.mycreditunion.gov/share-insurance
3Money Market Account is a tiered variable account wherein 3.00% annual percentage yield applies to all balance tiers, which are identified as $0.01–$4.999.99, $5,000.00–$149,999.99 and balances over $149,999.99. Ask for details. Additional terms, conditions, fees & exclusions may apply. Rates may change without notice. If the account is closed before interest and/or bonus is credited, accrued interest and/or bonus may be forfeited for that statement cycle. Fees could reduce earnings. Minimum opening deposit: $100. Information is as of November 21, 2023.