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SAVING Money Market Accounts Explained: How They Work and W... 2026-02-26 · 6 min read · money market account · savings options · MMA

Money Market Accounts Explained: How They Work and When to Use Them

saving 2026-02-26 · 6 min read money market account savings options MMA banking explained

Money market accounts sit in a confusing middle ground between checking accounts and savings accounts. They often pay higher interest rates than regular savings accounts, offer more liquidity than CDs, and sometimes come with check-writing or debit card access — but they also carry more requirements and restrictions than standard accounts.

Understanding where money market accounts fit in the savings spectrum helps you decide whether one is right for your situation.

What Is a Money Market Account?

A money market account (MMA) is a type of deposit account that typically pays higher interest than a standard savings account while offering more flexibility than a CD. MMAs are offered by banks and credit unions and are FDIC or NCUA insured up to $250,000.

The key characteristics:

Don't confuse a money market account with a money market fund. These are different products. A money market account is a bank deposit account insured by the FDIC. A money market fund is a type of mutual fund that invests in short-term debt securities — it's not FDIC insured and carries (very low) investment risk. The naming overlap is genuinely confusing.

How Money Market Accounts Compare to Other Savings Options

MMA vs. High-Yield Savings Account (HYSA)

This is the most relevant comparison for most people.

Interest rates: As of 2026, top HYSAs from online banks (Ally, Marcus, SoFi) frequently match or exceed money market account rates. HYSAs have democratized access to competitive rates, reducing the rate advantage that MMAs historically held.

Minimum balance: HYSAs at online banks typically have no minimum balance requirement. Many MMAs require $1,000-$10,000 to earn the advertised rate or avoid fees.

Access: HYSAs are purely savings accounts — you transfer money to your checking account to spend it. Many MMAs include check-writing or a debit card, giving you more direct access to the funds.

FDIC insurance: Both are equally protected.

Verdict: For most people in 2026, a high-yield savings account offers equivalent or better rates with no minimum balance requirements. MMAs make more sense if you want direct check-writing access to higher-yield savings or if your bank's MMA rate genuinely beats its HYSA rate.

MMA vs. CD

Interest rate: CDs often pay higher rates than MMAs, especially for longer terms. You're trading liquidity for rate.

Flexibility: MMAs allow ongoing deposits and withdrawals. CDs lock your money in for the term — withdraw early and you pay a penalty.

Best use: MMAs for money you might need access to. CDs for money you're confident you won't touch for the term's duration.

MMA vs. Checking Account

Checking accounts are for spending — deposits in, payments and transfers out, unlimited transactions. MMAs are for saving — slower access, higher rates.

MMAs with check-writing and debit card access blur this line, but they're still fundamentally savings vehicles. Using an MMA as a primary spending account is inefficient due to transaction limits.

When a Money Market Account Makes Sense

You want check-writing access to your savings. If you occasionally need to write a check directly from savings (rare, but some landlords, contractors, and organizations still prefer checks), an MMA lets you do this without transferring to checking first.

Large balance with a rate advantage. Some banks offer tiered MMA rates where larger balances earn significantly higher rates. If you have $50,000+ in savings and your bank's MMA pays meaningfully more than its HYSA at that balance level, the MMA is worth considering.

Business accounts. Business money market accounts often come with check-writing and are widely used by businesses to park operating reserves at higher rates than a checking account.

Emergency fund with maximum accessibility. For people who want their emergency fund accessible without any transfer delay, an MMA with a debit card or checks provides more immediate access than a pure savings account.

When a Money Market Account Doesn't Make Sense

You don't have the minimum balance. Many MMAs require $2,500-$10,000 to earn the top rate or avoid fees. If you can't consistently maintain that balance, the fees or lower rates negate the benefit.

Your HYSA already pays the same rate. If your Ally or Marcus high-yield savings account is paying 4.5% and the MMA at the same or another bank also pays 4.5%, there's no rate reason to switch.

You want to invest long-term. MMAs, like all bank savings products, are for money you need accessible and safe. For long-term wealth building (5+ year horizon), index fund investments historically outperform any savings account.

Finding the Best Money Market Account Rates

As with HYSAs and CDs, online banks and credit unions typically offer the most competitive MMA rates.

Where to check:

What to compare:

Current competitive MMA rates in 2026 from top institutions range from approximately 4.0-5.0% APY, varying by balance tier and institution.

How to Open a Money Market Account

Opening an MMA is the same process as opening any bank account:

  1. Choose an institution and compare their MMA features
  2. Go to their website and select the MMA product
  3. Provide personal information (name, address, SSN, date of birth)
  4. Link an external account for funding
  5. Make the initial deposit (verify you meet any minimum)
  6. Set up online access and the mobile app

The process takes 10-20 minutes and accounts are typically active within 1-3 business days.

The Tax Treatment

Interest earned in a money market account is taxable income, reported on Form 1099-INT from the bank each year. Include it in your federal and state income tax returns.

Unlike capital gains (which have preferential tax rates), MMA interest is taxed as ordinary income at your marginal rate. For high earners in high-tax states, this tax treatment is worth considering when comparing MMAs to other savings options.

A Practical Example

Sarah has $15,000 in her emergency fund. She wants it accessible but earning more than her current 0.02% savings account.

Option 1: HYSA — Move everything to Ally savings at 4.5% APY. Earns $675/year. Transfers take 1-3 business days when needed.

Option 2: Money Market Account — Open an MMA at Discover at 4.7% APY with a $2,500 minimum (she easily meets this). Earns $705/year. Comes with check-writing ability for any emergency that requires a check.

Option 3: CD Ladder — Not ideal for an emergency fund since liquidity isn't guaranteed.

In this scenario, the MMA earns slightly more and offers check-writing, which Sarah occasionally finds useful. For someone who doesn't need checks and would be happy with transfers, the HYSA is simpler and nearly equivalent.

The Bottom Line

Money market accounts are a legitimate savings option, particularly for people who want a combination of higher interest rates and flexible access through check-writing or a debit card. In 2026, the rate advantage over high-yield savings accounts has narrowed — compare current rates before assuming an MMA pays more.

For most people with no minimum balance requirements and no need for check-writing on their savings, a high-yield savings account is the simpler, equally competitive choice. For larger balances or specific access needs, a money market account is worth evaluating.

The most important thing isn't which one you choose — it's that you're not leaving money in a 0.02% traditional savings account when both options offer 20-25x more interest for zero additional risk.