A money market account (MMA) is a type of savings account that combines the best features of both checking accounts and regular savings accounts. With money market accounts, you can access your savings through checks and debit cards while typically also earning a higher interest rate than you would with most standard savings accounts. Currently, the average annual percentage yield (APY) for an MMA is below 1.00%, but you can find accounts with much higher rates.
Latest money market account rates
If you have at least $10,000 to stash in a money market account, you could get an average APY of %, according to Curinos data. This is the same as last week. The highest rate available is %, the same as last week.
If you invested $10,000 into an MMA for a year, with a % APY that compounds daily, you’d earn $0.00 in interest.
If you invested $10,000 into an MMA for a year, with a % APY that compounds daily, you’d earn $68.21 in interest.
The basics of money market accounts
If you want easier access to your savings account funds — or a checking account that pays higher interest — then you are a prime candidate for a money market account. Money market accounts combine the best features of savings and checking accounts.
Like checking accounts, money market accounts let you use checks or debit cards to access funds. Like savings accounts, money market accounts pay interest on your deposits, though usually at higher rates. The average money market account paid interest of % as of June 5, 2024, , according to Curinos. In contrast, the average savings account paid . The best money market rates pay annual percentage yields of 5.00% or more.
How money market rates work
Like all savings accounts, money market accounts pay interest on your balance. The amount of that interest is largely up to the bank or credit union — and there can be wide gaps between the rates offered by different financial institutions. The interest you earn might be compounded daily, monthly, quarterly or yearly. Rates are reflected in an account’s annual percentage yield, which determines the amount of your return.
Factors influencing money market account rates
Banks and credit unions set their own money market rates based on external market conditions and their own internal financial metrics. Much of it depends on what banks value. Banks that need to build up their savings deposits may offer higher rates to draw more customers. But banks that already have plenty of business through other products and services are less inclined to offer high money market rates.
Online banks often have higher interest rates than brick-and-mortar banks because they have lower overhead costs.
Typically, banks that offer lower-than-average rates on other savings accounts will also offer below-average rates on money market accounts. It also goes the other way — when a bank offers a competitive rate on regular savings accounts, you can expect it to do the same with money market accounts.
Regardless of the bank, money market rates tend to move higher when the Fed hikes its rates and lower when it cuts rates.
Benefits of money market accounts
The biggest advantage of a money market account is that you can spend or withdraw money using checks or debit cards — something you typically can’t do with other types of savings accounts. Another benefit is that your money is protected by the Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) as long as your financial institution is federally insured, which you don’t have with stocks and other investments.
Here are a couple of other advantages:
- You’re likely to get higher APYs with a money market account than with a standard savings or interest-bearing checking account
- Unlike a CD, your money isn’t locked into a set term with a money market account so there are no early withdrawal penalties.
Drawbacks of money market accounts
There aren’t a lot of drawbacks to money market accounts when compared with other bank savings products. Like all accounts, you could face limits on monthly transfers and withdrawals as well as minimum deposit and balance requirements. Some money market accounts charge monthly maintenance fees, ATM fees, transfer fees or inactive account fees.
The main drawback with a money market account is that the return you get could be pretty low unless you shop around for the highest APY. Putting your funds into a money market account that pays a 0.05% APY means your money could lose value if you factor inflation into the mix.
How to open a money market account
If you want to open a money market account at a bank where you already do business, you just need to go to the account link and make an opening deposit. If you’re opening an account at a new bank, you’ll need to provide information to confirm your identity, including the following:
- Government-issued photo ID such as a driver’s license or passport.
- Social Security number or tax identification number.
- Documentation of proof of address such as a utility bill or lease agreement.
The Federal Reserve and money market account rates
The Federal Reserve plays a big role in all types of savings account rates, including money market accounts. Banks and credit unions tend to follow Fed policy. When that policy leads to higher interest rates, you can expect money market rates to move up. When the Fed lowers rates, your money market APY is likely to go down.
Other savings accounts and options
The primary bank alternatives to money market accounts are checking accounts, standard savings accounts and CDs. Checking accounts have no withdrawal limits but pay lower interest rates if they pay them at all. Standard savings accounts also tend to offer lower rates than money market accounts — except for high-yield savings accounts. However, high-yield accounts don’t let you access the money via checks or debit cards.
With CDs, your money is locked up for a set term. If you withdraw money before the CD’s maturity date, you’ll face an early withdrawal penalty.
Frequently asked questions (FAQs)
It depends on the bank. As a general rule, banks can raise or lower money market account rates at their discretion. Keeping track of the broader rate environment will give you an idea if your money market rate is likely to go up or down.
During periods of high inflation the Federal Reserve often raises rates, which means money market rates also move higher. When inflation slows down the Fed might cut its rates, leading to lower money market APYs.
There’s nothing stopping you from trying to negotiate a better rate with your bank. But unless it’s a small bank you have a longstanding relationship with, you’re unlikely to succeed.
Because nearly all banks and credit have FDIC or NCUA protection, your deposits are federally insured up to $250,000. This means you can’t lose money unless you have more than $250,000 in your account or the account is not federally insured,
