What Is a Money Market Account?

Disclaimer: This article is for general educational purposes only and is not intended to imply that Citi offers the product or product features discussed herein. Citi may have different product offerings and/or eligibility criteria than those mentioned in this article.

Key insights:

• Money market accounts are a type of deposit account that may have some similar features with savings accounts and checking accounts
• A money market account lets you earn interest and may provide access to checks and ATM cards
• That said, there can be restrictions, such as transfer limits, variable interest rates and monthly fees

A money market account is a type of deposit account that lets you earn interest on your money. Some banks may also refer to their money market accounts as savings accounts. In general, however, you can open a money market account through your bank, and it may offer some similar features to checking accounts, such as check writing. There are some 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 a type of deposit account. In general, you can open a money market account with a financial institution, such as an online or brick-and-mortar bank. You might consider this type of account to save for goals like:

• Building an emergency fund
• Buying a car
• Traveling
• Planning a wedding

Money market accounts are interest-bearing. Interest may compound daily, monthly or annually. Interest rates are often variable, and banks may offer higher rates for larger balances.

Some money market accounts allow account owners to use checks and ATM cards. However, some banks may limit the number of withdrawals.

Advantages and drawbacks of money market accounts

Like any account, there are pros and cons associated with opening a money market account.

Money market account advantages

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 a debit card and access ATMs
• Generally, deposits in a money market account offered by a FDIC-member bank are insured up to FDIC limits

Money market account drawbacks

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, meaning 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 have monthly service fees to maintain your account

Money market accounts can provide a flexible way to save money, earn interest and keep your funds accessible via checks or ATMs. But there are also drawbacks to consider. If you’re looking to open a money market account, carefully review the terms beforehand to ensure they align with your goals for the 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.