A money market account is a savings deposit account that allows you to earn interest on your money. Some banks also refer to their money market accounts as savings accounts. You can open a money market account through your bank, and, like checking accounts, deposits in a FDIC-member bank are insured up to FDIC limits. There are many advantages to opening a money market account and some restrictions you’ll want to be mindful of.
Let’s look at how money market accounts work, as well as some of the pros and cons of having a money market account.
How do money market accounts work?
Money market accounts are savings accounts. Here are some of the basics.
You can open a money market account with a financial institution, such as an online or brick-and-mortar bank. Money market accounts are interest-bearing. Generally, interest compounds daily and is paid monthly. The interest is often variable and banks may offer higher rates for larger balances.
In terms of access, some money market accounts allow account owners to use checks and ATM cards. However, some banks may limit the number of withdrawals.
Benefits and drawbacks of money market accounts
Like any account, there are pros and cons associated with opening a money market account.
Benefits of money market accounts
Some of the pros include:
- Money market accounts can help you save for a future goal, like a vacation or a car, while still enjoying easy access to and flexibility with your money
- You can typically earn some interest on your money
- Some money market accounts allow you to write checks, use an ATM card and access ATMs
- Deposits in a money market account offered by a FDIC-member bank are insured up to FDIC limits
Drawbacks of money market accounts
Some of the cons are:
- While money market accounts sometimes offer account holders access to funds via check or ATM card, some banks may limit the number of withdrawals and transfers
- The interest rates on money market accounts are variable. This means that your interest rate can change based on market rates
- Money market accounts are typically suited to short-term savings, like saving for a vacation, not longer-term goals like retirement
- Some banks may impose monthly service fees to maintain your account
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
