Money market accounts (MMAs) - not to be confused with money market funds - are a specific type of savings account that require higher minimum balances and earn interest at higher APYs. Most also allow the use of personal checks. While money market accounts are treated as a separate category from high-yield savings accounts, the distinction between the two types has blurred following the decline in interest rates since 2008.
Money Market Accounts and APY
Most banks change the APY of your money market account based on the balance threshold you meet. The more money you deposit, the higher the interest you earn on the balance. We looked at some of the standard MMA offerings at major banks to illustrate the rates you can expect.
|$1 - $9,999||$10,000 - $49,999||$50,000 - $99,999||$100,000+|
Bank of America Rewards Money Market Savings
|0.03%||0.03% - 0.04%||0.05%||0.06%|
Capital One 360 Money Market
Chase Savings Plus
Citibank Savings Plus
|0.01%||0.04%||0.04%||0.06% - 0.08%|
PNC Premiere MMA
|0.03%||0.09% - 0.11%||0.13%||0.15% - 0.17%|
SunTrust Signature Money Market
|0.01%||0.03% - 0.05%||0.05%||0.05%|
TD Growth Money Market
|0.03% - 0.10%||0.15% - 0.20%||0.25%||0.30%|
US Bank Standard Money Market
Wells Fargo Platinum Savings
Many banks also offer options to earn higher rates on the money market account if you open a checking account with the same bank. The bonuses gained from linked checking tend to be larger and easier to access than the scaling increases from maintaining a larger balance. You can check a list of our choices for the best checking options here.
Benefits of a Money Market Account
Money market accounts are essentially bigger savings accounts: they have bigger APYs, but also bigger minimum balances, bigger opening deposits, and bigger monthly fees. You would want to switch from a standard savings account to an MMA at the same bank when your standard savings account balance has grown enough to meet the balance requirements of a higher-interest money market account. Switching from standard savings to the money market account would be an easy way to boost your interest rate without sacrificing the convenience of a linked checking account.
Linking your checking account to a money market account can offer several advantages:
- Boosted “relationship” rates of return on your balance
- More options to waive account maintenance fees
- Free and easier transfer options between accounts at the same bank
Some banks will increase the APY on their MMA offerings when the account-holder opens a checking account in addition to the money market account. These higher rates are termed “relationship rates” or “rate bumps”. Usually, the qualifying checking account will have similar balance requirements and fee levels as the money market account.
In some instances, banks will also combine the balances in all your accounts when calculating the amounts required for waiving monthly fees, making them much easier to avoid. You may also be given the option to avoid monthly fees by setting up a recurring automatic deposit from your checking into your money market account.
Aside from boosting rates and facilitating fee waivers, having one place for all your accounts also makes it much easier to move funds between them. There are usually no fees associated with moving funds between accounts held in the same institution, with the exception of excessive withdrawal fees, also known as withdrawal limit fees.
Comparing Money Market Accounts to Other Savings Options
Money market accounts are useful not only for the numerous benefits you receive from linking them to checking accounts, but also for their well-rounded combination of features. They are more accessible than certificates of deposit (CDs), earn better interest rates than standard savings accounts and enjoy the FDIC insurance that riskier investment vehicles lack. However, they do not stand out as the leader in any particular attribute. If you value any one specific quality over the others, you will likely find a better option in a more specialized financial product.
Money Market Accounts vs. Standard Savings Accounts
If you can meet the higher balance requirements of a money market account offered by your current bank, there is usually little reason to avoid switching from a standard savings account. Although falling below certain balance thresholds can result in reduced APYs, your overall earnings from interest will benefit from the switch, so long as you can also meet the higher minimum daily or average balances required to waive the monthly fee.
Additionally, money market accounts are different from standard savings in that they allow you to write personal checks. Despite being limited to six convenient withdrawals per month just like other savings account types, the flexibility offered by the checks can be a useful perk if you only expect to write a few now and then.
Money Market Accounts vs. High-Yield Savings Accounts
For most consumers, there is little to distinguish the modern high-yield savings account from a money market account. In shopping for a higher-balance savings account, you can safely consider the two types equal, and focus on distinguishing among your choices by APYs, required balances and fee schedules. Each bank seems to take a different marketing approach with regards to high-yield and money market accounts, with some banks offering only one of them, and others offering both, but putting stricter requirements and higher rates on one or the other, at their choice.
A decade ago it was possible for high-yield savings accounts to earn as much as 4.5% APY. However, in the years following the Great Recession, high-yield rates have dropped steeply, and nowadays the two account types compare similarly. At the time of writing, the FDIC's weekly survey of interest rates listed the national averages for savings accounts and money market accounts at 0.06% and 0.08% respectively. We found several alternatives for higher rates in our survey of best savings accounts.
Money Market Accounts vs. CDs
Choosing between certificates of deposit and money market accounts involves a tradeoff between interest rates and accessibility. Certificates of deposit are time deposits, which mean that you must wait for a fixed term before you can access your money. Withdrawing early from a CD incurs considerable fees, amounting to as much as six months of earned interest. This limited accessibility, or illiquidity, is the chief reason CDs have higher interest rates than money market accounts.
In the survey above, the FDIC reported an average interest rate of 0.13% for 6-month and 0.22% for 12-month CDs; the average money market rate of 0.08% is equal to the fixed average return for a 3-month CD. Yet despite the strong rates on CDs, few people can afford to lose access to all their savings for any period of time.
As a result, certificates of deposit are best used as supplements to a more liquid asset, like a money market account, rather than as the central component. Setting aside a smaller amount you can afford to part with for a year or two can allow you to tap into the highest APYs available for CDs without sacrificing the accessibility of your savings as a whole.