4 Little-Known Facts About Money Market Accounts

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KEY POINTS

  • Higher interest rates across the board have also meant higher rates on savings accounts, CDs, and money market accounts in 2022.
  • If it's time for a new bank account, consider an MMA.
  • These accounts come with FDIC insurance and check-writing capabilities, and may be a good place to keep your precious emergency fund.

Have you ever considered opening one?

Inflation has truly been the monster living in everyone's closet in 2022, making everything more expensive, especially the costs of everyday living like groceries and utility bills. The Federal Reserve has implemented multiple rate hikes this year in an attempt to slow down inflation, but the effect has only been slight so far.

Perhaps the only silver lining for consumers lately has been the higher annual percentage yield (APY) rates that have been offered on savings accounts, certificate of deposit (CD) accounts, and money market accounts in 2022.

A money market account (MMA) is a bank account that is almost like a hybrid of a checking account and a savings account, with features of both. If you're looking to open a new bank account soon, perhaps as part of your 2023 financial plan, it's worth thinking about an MMA. Here are some interesting facts about them to consider.

1. MMAs are FDIC insured

FDIC insurance may not be something you think about regularly (or at all), but it's the reason the money you keep in your checking account, savings account, CD, or MMA is safe. Thanks to the Federal Deposit Insurance Corporation (an independent agency of the federal government), up to $250,000 per account will be returned to you if your bank is insured and later fails. As of this writing, 4,742 banks fall under the FDIC umbrella. You can check on yours using the FDIC's BankFind tool. If you open a money market account with a credit union, it will be subject to NCUA (National Credit Union Share Insurance Fund) insurance instead.

It's important to keep in mind that MMAs are insured this way because their name is a little misleading -- when you hear the word "market," you might think the stock market and investing, and the funds in an investment account are NOT protected by the FDIC.

2. MMAs may let you write checks

A checking account feature that MMAs often come with is the ability to write checks on the money stored in one. This makes them more user-friendly in terms of money accessibility than many high-yield savings accounts. Savings account holders may have to jump through some extra hoops to access their money in cash (such as opening a linked checking account in order to get a debit and ATM card, or having to transfer money from the savings account to a checking account).

Keep in mind that MMAs fall under Regulation D, along with savings accounts. This means account holders are only allowed six "convenient transactions" per month, meaning you can't exceed that number of automatic transfers, online banking transactions, and debit card or check transactions. If you do, you may incur a fee or the bank could convert your MMA to a checking account. So while you may receive checks, tread lightly when it comes to accessing your money.

3. MMAs may have a minimum deposit amount

This MMA fact may mean these accounts aren't a good fit for everyone. Some banks require you to make a minimum deposit to open your account, keep it open, or even to earn the highest advertised interest rate on the money you keep in it. By contrast, many of the best high-yield savings accounts have no required minimum deposit.

4. MMAs can be a good place to keep your emergency fund

Having a solid emergency fund is the cornerstone of financial security. It's incredibly important to have a source of money to use for an unplanned bill, saving you from going into debt by paying it with a credit card, personal loan, or other borrowed money you'd have to pay interest on.

A money market account can be a great place to keep your emergency fund, especially if the amount you have saved will meet a minimum deposit requirement from the bank you're considering. Why? Remember that MMAs give you easier access to your money than you'd get with many savings accounts.

Let's say your car breaks down on your way to work one day and you need to pay to have it fixed out of your emergency fund. Rather than having to transfer money from a savings account to your checking account so you can write that check (or pay your mechanic with your debit card), you might be able to write a check right from your MMA. Convenient and fast!

If you've never considered a money market account before, do some research on the best MMAs available and see if one might be right for you and your money.

These savings accounts are FDIC insured and could earn you 11x your bank

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Two of our top online savings account picks:

Rates as of Apr 17, 2024 Ratings Methodology
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SoFi Checking and Savings Western Alliance Bank High-Yield Savings Premier
Member FDIC. Member FDIC.
Rating image, 4.75 out of 5 stars.
4.75/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
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Rating image, 4.50 out of 5 stars.
4.50/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor

APY: up to 4.60%

APY: 5.36%

Min. to earn APY: $0

Min. to earn APY: $0.01

Our Research Expert

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