What is a business money market account?

At its core, a business money market account is a type of deposit account. These accounts — like personal money market accounts (MMAs) — combine some of the features of both checking and savings accounts to give account holders more flexibility.

For example, business money market accounts typically offer higher interest rates than the standard business savings account. However, like a business checking account, they may also come with checks or a debit card, which gives you more control over withdrawals.

In exchange for that flexibility, these accounts often have strict monthly transaction limits. Other stipulations, such as a minimum deposit amount, may also apply. Plus, if you don’t adhere to these requirements, you may be subject to fees.

Similar to other deposit accounts, business MMA accounts are also offered by banks and credit unions. The funds in these accounts are typically insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 when held by the same owner or owners.

What are business money market account rates?

As stated earlier, business money market accounts typically offer higher interest rates than your standard savings account. According to FDIC data from July 15, 2024, the average annual percentage yield (APY) on a money market account is 0.66%, compared to 0.45% for a savings account. Still, you can often get a much higher rate than that, as the national rate cap set by the FDIC (effectively how high interest rates can rise) extends all the way to 6.08%

As with other savings accounts, banks and other financial institutions typically pay compound interest on money market accounts. This means interest accrues both on your principal balance and any interest earned while it's held in the account. In this case, the more often the bank compounds its interest, the higher the returns.

However, some financial institutions may limit which account holders are eligible to earn the highest rates. For instance, you may need to meet a minimum balance requirement to earn any interest, or there may be a tiered rate system that allows the highest balance holders to earn the highest rates.

 Want to know how much you could earn? Use our compound interest calculator to see how different rates can affect your savings.

Pros and cons of business money market accounts

As with any financial decision, there are some distinct advantages and disadvantages to opening a business money market account. Here are some factors you may want to consider as you weigh your options.

Pros:

• Your savings will be insured: The FDIC and National Credit Union Association (NCUA) insure most deposit accounts for amounts up to $250,000 per depositor, per insured bank, for each account ownership category.
• You may earn interest at a higher rate: Business money market accounts traditionally offer higher interest rates than regular business savings or checking accounts.
• You’ll have more flexibility: Money market accounts offer more flexibility than other financial vehicles, such as a traditional savings account or a certificate of deposit (CD). They may offer checks or a debit card to help you easily access the funds in your account.

Cons:

• You may be subject to account minimums: Some business money market accounts have minimum deposit amounts to maintain or minimum daily balance requirements.
• You may face strict transaction limits: You may also be subject to transaction limits with a business money market account, such as being able to make only six transactions per month.
• You may have to pay additional fees: If you are unable to comply with the account minimums or transaction limits, the bank or credit union may charge penalty fees.

How to choose a money market account for your business

Choosing a money market account for your business is not a one-size-fits-all endeavor. Since your business is unique, some business MMA accounts may be a better fit than others. As you begin your search for your perfect match, here are a few key factors to keep in mind:

• Interest rate: Since a money market account is a form of savings account, you’ll want to look for an option that offers the highest rate available while accommodating your anticipated deposit amount.
• Fee structure: Pay attention to any fees associated with the account. Monthly maintenance fees are common, although they can sometimes be waived if you meet a set minimum account balance. Foreign transaction fees, ATM withdrawal fees, overdraft fees and check order fees are also common.
• Minimum requirements: Money market accounts often require an initial deposit and a minimum balance. You’ll need to be able to meet or exceed both of these amounts to avoid being charged fees, so do your research to ensure you pick an account with minimums that work well within your budget.
• Liquidity: Some MMA accounts limit the number of transactions you can make on a monthly basis while others offer unlimited transactions. Some accounts also allow you to hold checks or a debit card. Make sure you choose an account that gives you enough liquidity to access the cash you need.
• Features and perks: Some banks and credit unions offer access to a mobile app for easy online banking with business MMA accounts. Others offer referral bonuses for introducing friends and loved ones to the account. Whatever type of features and perks you’re looking for, make sure you choose an account that delivers.

Should you open a money market account for your business?

A business money market account can be a useful tool if you want to save money for your organization while maintaining some liquidity. These accounts typically have higher interest rates than standard savings accounts, and they may offer access to checks or a debit card for easy withdrawals.

At the same time, they may not be right for every business. If you need frequent access to your cash, for example, you may bristle at a business MMA account that imposes strict monthly transaction limits. Plus, you could be subject to hefty fees with some accounts, especially if you can't meet the required account minimums.

With that in mind, consider how often you’ll need to access your cash and how much you intend to keep in the account on a regular basis. If you think you may need more than six transactions per month and anticipate having a fluctuating balance, you may be better suited to an alternative option that will give you more flexibility, like a business checking account.

However, if you think you’ll be able to keep money in the account long-term and your balance is likely to stay stable or grow over time, you could be well-suited for a business MMA account.

How to open a business money market account

Now that you know what a business money market account is and have a better idea of whether opening one is right for your organization, here’s a step-by-step guide on how to open an account if you feel it’s your best option.

1. Do your research: Take some time to shop around and find the right business money market account for you. Use the key metrics listed above to help guide your search. In particular, make sure you understand any prescribed account minimums, as well as the fee structure and the interest rate you’ll receive.
2. Gather the necessary documents: Typically, you’ll have to provide personal identification for any business owners whose names will be listed on the account. You’ll also have to prove that your business is a legally formed entity. This proof could be in the form of a federal tax ID number, such as an EIN number, or other legal documents, such as your articles of incorporation.
3. Make your minimum deposit: Some business MMA accounts require a minimum opening deposit, while others let you open the account and fund it later. However, if your chosen account does require a minimum deposit, you’ll need to be prepared to fund the account with that amount on the day you open it.

Alternatives to business money market accounts

If you’re not sure that a business money market account is the right fit for your organization, you have alternative options. Here are a few to consider:

Business checking accounts

Your typical business checking account offers more flexibility than a business MMA account. These accounts are designed for daily spending, so you likely won’t face transaction limits or account minimums.

Some business checking accounts earn interest, but the rates likely won't be as high as those of a typical money market account. As a result, this type of account is best suited for funds you’ll need to access regularly.

Business savings accounts

If you have less to save and don’t need to access your money often, a business savings account will likely be more suitable. These accounts usually won’t require account minimums, so you’ll be able to save at your own pace.

In exchange, however, the interest rates on business savings accounts are typically lower than on an MMA account. Additionally, these accounts don’t provide checks or debit cards, so you’ll need to be prepared to make a transfer when you are ready to access your funds.

Certificates of deposit (CDs)

Certificates of deposit often garner higher interest rates than savings or money market accounts. But there's a catch: To earn the full amount of interest and avoid an early withdrawal penalty, you'll need to leave the money untouched for its full term, which could last several months or even years.

With that in mind, you may want to reserve the use of CDs only for funds that your business may not need anytime soon.