What are Money Market Accounts and How Do They Work?

By: Stephanie Faris

If you want to freely take money from your bank account, you’d usually rely on a checking account. Savings accounts have traditionally been set up so that you can’t easily spend the funds you store in them. But even if you can find an interest-bearing checking account, the rate is usually so low, it doesn’t make much of a difference. This leaves savings and investments as the best options for earning interest.

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Money market accounts have emerged as a popular option in recent years. They offer the convenience of a checking account with the higher interest rates of savings. You’ll even be able to write checks on the account. But money markets have notable differences from a checking account that you’ll need to know before you sign up.

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About Money Market Accounts

Prior to 1980, consumers had limited choices when it came to bank accounts. The Depository Institutions Deregulation and Monetary Control Act of 1980 gave financial institutions the flexibility they needed to serve customers, including adding new types of accounts. Two years later, the Garn–St. Germain Depository Institutions Act of 1982 created a new type of savings account that could offer higher interest rates, the Money Market Deposit Account. Money markets immediately took off and have remained popular with depositors in the decades since.

Opening a Money Market Account

There’s nothing complicated about opening a money market account. In fact, you may find that your current bank will let you move the funds in your savings over to a money market account, as long as you have enough to meet minimum balance requirements. Those requirements can vary from one lender to the next, with some financial institutions allowing you to open an account and earn interest with only $1.

Rate of Return

If you’re comparing money market accounts to high-risk investments like stocks, you’ll be disappointed. But compared to savings accounts, you’ll find they’re a much better deal. Money markets can earn 2-3 percent, which isn’t much lower than some of the highest rates for CDs and with those, you’re required to leave your money in place for months or years. But it’s important to shop around to find the best rate on your money market, whether you prefer to stay with a local lender or do all of your banking online.

Top Money Market Provider 2019

0.01%-1.85% APY
$100 Min balance for APY
Yes FDIC Member

Transaction Limits

Although you can withdraw money and write checks on your money market account, you’ll be limited to six transfers or withdrawals per month. This is due to Regulation D, which places restrictions on savings account deposits and withdrawals. But it’s important to note that you can still access your funds even if you’ve exceeded the limit for the time period. Many banks allow you to withdraw funds through a teller at one of their bank branches, and you should be given an ATM card that you can use to pull cash out of your account.

The key to finding the best deal on a money market savings account is to shop around. There’s no shortage of lenders, each trying to remain competitive in the marketplace. Even if it seems easier to set things up with your current bank or credit union, that shouldn’t stop you. Money market accounts can be set up with an online lender from the comfort of your own home.