Money Market vs. Checking Accounts - SmartAsset

Checking accounts offer convenience for managing your money in a single account and getting access to those funds at your discretion. You can use a checking account to pay bills, transfer money to linked accounts or make purchases using a debit. Those are also things you can do with a money market account, but there are a few differences. Comparing a money market and a checking account can help you to decide which one you might need. You can also consider working with a financial advisor to help you make all of your banking and investing decisions.

What Is a Checking Account?

A checking account is a type of demand deposit account that you can open at traditional banks, online banks and credit unions. Some brokerages may also offer checking account options for investors. When you open a checking account, you can deposit money into it and use that money as needed. Some of the things you can do with a checking account include:

Writing paper checks
Using a debit card to make purchases online or in stores
Withdraw cash at ATMs with your debit card
Deposit checks via mobile check deposit
Transfer money between linked accounts at the same bank or different banks
Schedule online bill payments
Direct deposit paychecks, tax refunds and government payments
Send money to friends and family

Having a checking account is a good idea if you want to keep your money accessible without having to carry cash or rely on alternative banking services, such as check cashing companies or prepaid debit cards.

Banks can charge fees for checking accounts, including monthly maintenance fees and overdraft fees. You may also pay fees for certain services, such as paper statements or wire transfers.

Checking accounts are safe when you hold your money at an FDIC member bank. The FDIC insures checking accounts and other deposit accounts up to $250,000 per depositor, per account ownership type and per financial institution. The National Credit Union Administration (NCUA) offers similar coverage for checking accounts held at credit unions, also referred to as share draft accounts.

What Is a Money Market Account?

A money market account (MMA) is a type of savings account that also shares certain features of checking accounts. Like checking accounts, you can find them at traditional banks, credit unions and online banks.

Here are some of the key features of money market accounts:

Balances can earn interest
Banks may offer check-writing and/or a debit card
Savers are typically limited to six withdrawal transactions per month
Can be linked to checking or savings accounts at the same bank or different banks
Deposits are FDIC or NCUA insured when held at member banks and credit unions

Banks can impose fees for money market accounts and there may be minimum balance requirements to avoid a fee or earn interest. Whether you can earn a higher interest rate with a money market account over a savings account or a certificate of deposit (CD) account depends on the bank.

Money market accounts may earn a flat annual percentage yield (APY) across all balances or rates may be tiered. Jumbo money market accounts may offer the highest rates, for instance, though you may need to maintain a balance of $25,000 or more to qualify for it.

A money market account is not the same thing as a money market fund. A money market fund is a type of mutual fund offered at brokerages. When you put money into a money market fund, you’re saving it in a low-risk way. When you purchase a money market fund, you’re making an investment that carries a higher degree of risk.

Differences of Money Market and Checking Accounts

Money market accounts and checking accounts have some things in common, though they aren’t identical. Comparing them side by side can make it easier to distinguish between the two.

How Money Market and Checking Accounts Compare

Feature	Money Market Accounts	Checking Accounts
Purpose/Function	Money market accounts are savings accounts that allow you to earn interest while offering convenient access to your money	Checking accounts are demand deposit accounts that you can use to pay bills, send money and make purchases
Earns Interest?	Typically, yes	Typically, no
Unlimited Withdrawals?	No, you’re usually limited to six withdrawals per month	Yes, though banks may impose ATM withdrawal limits or cap the number of checks you can write per month
Access	Banks may offer paper checks and/or an ATM/debit card for withdrawals or purchase transactions	Banks can offer paper checks and debit cards for withdrawals or purchase transactions
Best Uses	Saving for short-, mid- or long-term goals when you may need convenient access to your money	Paying bills, covering everyday purchases, sending money to friends and family, transferring money to savings

The biggest difference is what you can do with a money market versus a checking account and how often you can access your money. While you can withdraw from a money market account, your bank might charge an excess withdrawal fee if you go over six transactions per month. And it’s up to the bank to decide whether to give you paper checks, a debit card or an ATM card to access funds.

Checking accounts, on the other hand, usually don’t have those kinds of restrictions. The tradeoff is that most checking accounts don’t pay interest. It’s possible, however, to find interest checking accounts offered at some traditional banks and online banks.

Money Market vs. Checking Account: Which Is Better?

Whether it makes more sense to open a money market account or a checking account depends on your financial goals and needs. If you’re saving money for a down payment on a home, for instance, then you might want to park it in a high-yield money market account so you can earn interest in the meantime. When you’re ready to make your down payment, you can write a check or transfer the funds from your money market account.

Checking accounts are better suited for everyday use since there are fewer restrictions on how often you can make purchases, pay bills, write checks or withdraw cash. If you’re willing to shop around at different banks, you might be able to find a checking account that offers an interest rate that’s comparable to what money markets offer. Some checking accounts can also offer debit card rewards that pay you back a percentage of what you spend.

Of course, you could always split the difference and open both a money market and a checking account at the same bank or at different banks. That could be a good option if you want to keep the money you spend day to day separate from the money you plan to spend later. And you can link the two accounts so you can easily move funds back and forth between them.

The Bottom Line

Money market accounts and checking accounts can make managing money easier, though whether you choose one over the other can depend on your needs. You can also utilize both accounts if your financial situation benefits from having multiple accounts open. When opening a money market or checking account, remember to look at things like interest rates, minimum balance requirements and monthly fees to find the best banking options.

Checking Account Tips

Consider talking to your financial advisor about the merits of opening a money market versus a checking account and whether you might want to have both. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
In addition to money market accounts, you might also consider high-yield savings accounts or CD accounts. With a high-yield savings account, you can get a competitive APY on your money and CD accounts to let you earn interest over a set maturity. If you’re interested in who’s paying the highest APY for savings accounts or CD accounts, online banks are a good place to start looking. Online banks tend to offer better rates to savers while charging fewer fees, compared to traditional banks or credit unions.