Money Market vs. Checking Account: How Do They Differ?

Money market and checking accounts allow you to deposit, store and access funds, but the similarities stop there. Typically, a checking account pays little to no interest and is intended for everyday expenses, and a money market account is a savings option with features like a checking account.

In the matchup between money market and checking, the winner will be decided by your financial goals. You may choose one over the other or even use both depending on your circumstances.

What is a checking account?

A checking account is a safe place to store money that you want to access easily. You can make as many withdrawals from a checking account as you want.

You can have a checking account with a bank or credit union. Opening a checking account is typically possible online or in person. Your account balance will be insured up to $250,000, as long as the financial institution is a member of the Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) — and most U.S. banks and credit unions are.

Your checking account can generally issue checks, which you can use to make payments. The account gives you the ability to cash checks, such as your paycheck, if you’re not paid via direct deposit. You’ll also be able to get a debit card, which you can use to make payments.

Checking accounts can earn interest, but you should expect to earn at a lower rate than you would with savings accounts or certificates of deposit (CDs), if you earn at all. Rewards checking accounts exist if maximizing your annual percentage yield (APY) is a priority.

What is a money market account?

A money market account, also available from a bank or credit union, doesn’t let you access your funds as easily as a checking account does. You often need to meet minimum opening deposit and balance requirements, and these can be higher than the requirements for standard checking accounts.

You can expect to earn at a competitive interest rate, generally comparable to what’s available with high-yield savings accounts (HYSAs), though you’ll want to compare offers. You’ll typically have debit card access and check-writing abilities, unlike with most HYSAs.

You may have to maintain a minimum balance to unlock the money market account’s top interest rate. For example, U.S. Bank’s Elite Money Market offers a 3.25% APY on balances of at least $50,000, but only a 0.25% APY on balances between $25,000 and $49,999. In contrast, the UFB Portfolio Money Market earns an APY of 4.01% regardless of your balance.

Comparing money market and checking accounts

Money market accounts are less liquid than checking accounts, but they still offer relatively easy ways to tap into your funds. Both types of accounts can represent safe ways to store your money.

Other financial tools for saving

Although you can choose to store your savings in a checking account, opting to bring another savings tool into the picture can help you reach your savings goals. That tool could be a money market account, but this won’t always be the best choice. Instead, you may choose to open a:

• High-yield savings account (HYSA): HYSAs earn competitive APYs that can be higher than those offered on money market accounts. You won’t be able to write checks or make purchases with a connected debit card. Still, you can typically make a few withdrawals each month without paying a fee.
• Certificate of deposit (CD): CDs earn competitive APYs that can be higher than those available on money market accounts. When you open a CD, you agree not to touch your funds for a certain term, such as six months or two years. If you withdraw earlier than that, you may owe a fee. As a result, CDs are better suited for future savings goals and not for emergency funds.
• Individual retirement account (IRA) savings account: An IRA savings account shares an annual contribution limit with an IRA investment account, and it can be an excellent piece of your retirement savings plan. Unlike with a typical savings account, you won’t owe taxes on the interest you accrue every year. Instead, you’ll pay taxes when you make withdrawals. You generally won’t be able to access the funds in an IRA before age 59 ½ without incurring a significant penalty.
• Health savings account (HSA): If you have a high-deductible health plan, you could be eligible for an HSA. You won’t owe taxes on contributions or on withdrawals, assuming you use the funds to cover eligible medical expenses. These types of accounts are more narrowly available than money market accounts, and you’ll need to make sure they fit into your savings and health insurance plans.
• Money market funds: A money market fund is a relatively low-risk mutual fund. Unlike money market accounts, these aren’t eligible for federal deposit insurance. Money market funds also offer liquidity, so you’ll be able to access your funds fairly easily. Prospective investors should also explore the range of fund options.

Frequently asked questions

Is a money market better than a checking account?

No, a money market account isn’t better than a checking account. Instead, these two account types serve different purposes. You’ll use your checking account for everyday transactions, and you can choose to open a money market account to hold some of your savings.

What is the downside of a money market account?

Money market accounts can have downsides under certain conditions. For instance, if you need to access funds from your account several times during the month, you could start facing excessive transaction fees. A money market account may not be optimal if you plan to maintain a low balance. Some accounts only earn at their highest rate once depositors hit a certain balance.

Should I move my savings to a money market account?

If you’re trying to decide between a money market account versus checking account, consider your financial goals. A money market account is a useful place to stash cash that you want easy access to but don’t plan to draw on regularly, such as for an emergency fund or to build up savings for a medium-term expense.