An MMA savings account combines features of a savings account and a money market account
An MMA savings account (money market account) is a hybrid deposit account offered by banks and credit unions. It sits between a regular savings account and a checking account in how it works. You earn interest on your balance, just like a savings account, but you also get a debit card or checkbook to withdraw money directly, like a checking account.
The tradeoff is that MMAs typically require a higher minimum balance to open—often $2,500 to $10,000, though this varies by institution—and they limit how many withdrawals you can make per month. In exchange, the interest rate is usually higher than a standard savings account, especially if you maintain a large balance.
Money market accounts are FDIC-insured at most banks and NCUA-insured at credit unions, meaning your deposits are protected up to $250,000 per account owner per institution.
Key Takeaways
- An MMA combines a savings account's interest earnings with a checking account's withdrawal flexibility, but requires a higher opening balance than most savings accounts.
- Interest rates on MMAs are typically tiered, meaning you earn more interest when your balance is higher, and rates change based on what the Federal Reserve does.
- Most MMAs limit you to six withdrawals per month (though this rule has loosened at some banks), and exceeding the limit usually costs a fee.
- Your money is protected by FDIC or NCUA insurance up to $250,000, the same as any other bank or credit union deposit account.
How tiered interest rates work on an MMA
Interest rates on money market accounts are tiered, meaning the rate you earn depends on how much money you have in the account. A bank might offer 0.10% on balances under $10,000, 0.25% on balances from $10,000 to $50,000, and 0.50% on balances over $50,000. The higher your balance, the higher your rate.
These rates change frequently—sometimes weekly—based on what the Federal Reserve does with its benchmark interest rate. When the Fed raises rates, banks typically raise MMA rates within days or weeks. When the Fed cuts rates, MMA rates fall as well. This means the interest you earn is not locked in; it moves with the market.
The actual rates available vary widely by bank. Online banks often offer higher rates than brick-and-mortar banks because they have lower overhead costs. It is worth comparing rates across several institutions before opening an account, since a difference of 0.25% or 0.50% adds up over time on a large balance.
Withdrawal limits and how they affect your account
Most MMAs come with a limit on how many times per month you can withdraw money or transfer funds out. Historically, federal rules capped this at six withdrawals per month, though that rule has been relaxed in recent years. Many banks now allow unlimited withdrawals, while others still enforce a limit and charge a fee—usually $10 to $25—if you exceed it.
The withdrawal limit applies to transfers and debit card purchases, not deposits. You can deposit money as often as you want. Some banks count ATM withdrawals toward the limit, while others do not; you need to check your specific account agreement.
If you find yourself hitting the withdrawal limit regularly, an MMA may not be the right account for you. A regular checking account with no withdrawal limits would be more practical, even if it earns little or no interest.
Minimum balance requirements and fees
Opening an MMA usually requires a higher minimum deposit than a savings account. Common minimums range from $2,500 to $10,000, though some banks ask for $25,000 or more. A few online banks have lowered this to $1,000 or even $500 to stay competitive.
If your balance drops below the minimum, the bank may charge a monthly fee—typically $10 to $25—or close the account. Some banks waive the minimum if you set up automatic deposits or keep a linked checking account with them. Read the account terms carefully before opening, because minimums and fee structures vary significantly.
Beyond the monthly maintenance fee, watch for other charges: fees for exceeding withdrawal limits, overdraft fees if you write a check for more than your balance, and ATM fees if you use an out-of-network machine. These add up quickly and can wipe out the interest you earn.
When an MMA makes sense for your money
An MMA works best if you have a lump sum of money—$5,000 or more—that you want to keep accessible but do not need to touch frequently. It is ideal for an emergency fund, a down payment you are saving for, or money set aside for a specific goal six months to two years away.
An MMA is less useful if you need to make frequent withdrawals, if you cannot meet the minimum balance, or if you want to earn the highest possible interest rate. High-yield savings accounts at online banks often pay more interest than MMAs and have no withdrawal limits or minimum balance requirements, making them a better choice for many people.
Compare the interest rate, minimum balance, withdrawal limits, and fee structure across at least three institutions before deciding. A slightly higher rate at one bank might be offset by a higher minimum balance or stricter withdrawal rules at another.
How an MMA differs from a savings account and checking account
| Feature | Savings Account | Money Market Account | Checking Account |
|---|---|---|---|
| Interest earned | Yes, usually low | Yes, usually higher | Rarely, or none |
| Debit card or checks | No | Yes, usually both | Yes, checks and debit card |
| Withdrawal limit | Often limited | Often limited | Unlimited |
| Minimum balance | $0 to $500 | $2,500 to $10,000 | $0 to $500 |
| Best for | Short-term savings | Medium-term goals with occasional access | Daily spending |
Frequently Asked Questions
Can I lose money in an MMA if the interest rate drops?
No. Your principal—the money you deposit—is always safe and protected by FDIC or NCUA insurance. When interest rates drop, you simply earn less interest going forward, but you do not lose what you already have in the account.
What happens if my balance falls below the minimum?
Most banks charge a monthly fee of $10 to $25 if your balance drops below the required minimum. Some banks close the account after a certain period of being below the minimum. Check your account agreement to see your bank's specific policy.
Is an MMA better than a high-yield savings account?
It depends on your needs. High-yield savings accounts often pay higher interest rates and have no withdrawal limits or minimum balance requirements, but they do not come with a debit card or checkbook. If you need regular access to your money, an MMA may be more convenient. If you want the highest rate and do not need frequent withdrawals, a high-yield savings account is usually the better choice.
Can I use an MMA as my main checking account?
Technically yes, since most MMAs come with a debit card or checkbook, but it is not ideal. The withdrawal limits and higher minimum balance make an MMA better suited for savings than for daily spending. A regular checking account is designed for frequent transactions and is a better fit for that purpose.
Do I pay taxes on MMA interest?
Yes. Interest earned on an MMA is taxable income. Your bank will send you a 1099-INT form at the end of the year if you earned $10 or more in interest, and you report that amount on your tax return. The interest is taxed at your ordinary income tax rate.