Money Market Account 101: What is it, the Pros & Cons

By Sara

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Last Updated: August 29, 2022

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A traditional savings account can sometimes be a drawback if you don't want many accounts but want to have the benefits of a checking and savings account.

A money market account can give you both of these things. It's similar to a traditional savings account but allows you to write checks and have a debit card. 

 

 

What is a Money Market Account? 

This is a type of savings account that is an interest-bearing at your bank.

It is different from other savings accounts because it has components that are similar to a checking account. 

A money market account will pay a higher interest rate than a traditional savings account. For example, the average interest rate in this account is 0.08% compared to the average traditional savings account of 0.06%. 

What is really unique about this account from a traditional or high yield savings account is that you have access to writing checks and using a debit card with this account, which almost makes it like a checking account.

While a money market and checking account can write checks and have a debit card, there are some major differences.

  • In a checking account, you have unlimited withdrawals.
  • You don't have unlimited withdrawals with a money market account because it's a savings account.
  • All savings accounts have some type of limit to how much you can withdraw. 

They are different from a traditional savings account, though, because you can use this account almost like a checking account where you will have a checkbook and debit card with this account. 

 

 

Things to Consider When Looking for a Money Market Account 

When choosing a money market account, there are some key components to consider to get the best account for your needs.

First, find out each bank's interest rates, monthly fees, minimum balances, and withdrawal limits. You want to find the best interest rate and lowest fees and balances. 

  • Some banks will require at least $100 to open an account, but there are fees.
  • Find out if your bank has a minimum balance to waive fees.

For example, some banks request $100 to open with a $12 monthly fee unless you have $5,000 in the money market account. Their interest rate is 0.02%.

Other banks have an interest rate of 0.5%, do not require an amount for the initial deposit, and have no fees.

Find out what works for you. If you have less than the balance to waive fees, find a bank that doesn't have any fees. 

 

Pros 

One benefit of a money market account is that they have higher interest rates than other savings accounts.

This will allow you to get the most money back on your savings. 

Writing a check and having debit card access to this account makes this a unique account.

You have the benefits of a savings account along with some convinces of a checking account. Writing a check or using a debit card directly from this account will allow you to use this account to pay for planned expenses.

 

Cons 

One drawback of this type of account is that many banks will require a higher minimum balance to waive fees and have higher fees in general.

This can make it more challenging for someone to open this account if there are high fees and a high minimum amount. 

Another drawback is that since there you can write a check or use a debit card, you may be tempted to use this account more like a checking account rather than a savings account. You could easily go over your withdrawal limit because of this as well. 

 

 

Final Thoughts on the Money Market Account

A money market account is a great option for someone looking for a savings account with aspects of a checking account.

This can be great for your emergency fund, where you want to easily access the money in the event of an emergency. You can write checks and use a debit card from this account while getting the benefit of a higher interest rate.

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