Pros and Cons of Money Market Accounts: What To Know Before You Open One

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If you’re looking for a savings option that offers both growth and access, money market accounts might be on your radar. But are they the right fit for your financial goals?

Understanding the money market account pros and cons can help you make a smarter, more confident decision.

In this guide, we’ll break down the advantages of money market accounts, potential risks and how they stack up against other savings choices. Whether you’re new to saving or just reevaluating your options, here’s what you need to know.

What Is a Money Market Account?

A money market account (MMA) is a type of interest-bearing deposit account blending features of both a savings and checking account. You earn interest — usually at a higher rate than standard savings accounts — and have limited access to your funds via checks or debit cards.

Most money market accounts are insured up to $250,000 by the FDIC (for banks) or NCUA (for credit unions), adding a layer of protection for your cash.

Pros of Money Market Accounts

The benefits of money market accounts make them appealing to savers who want both safety and flexibility:

1. Higher Interest Rates

Money market accounts often offer better rates than traditional savings accounts, especially amid rising interest rates.

2. Limited Check Writing and Debit Access

Unlike typical savings accounts, MMAs may come with check-writing privileges or a debit card, making your funds easier to access.

3. FDIC/NCUA Insurance

Money market deposit accounts are considered low-risk because they’re typically insured up to $250,000 per depositor.

4. Great for Emergency Funds

If you want your emergency fund to earn interest but still be accessible, a money market account is a smart option.

Cons of Money Market Accounts

Despite the perks, there are some money market account disadvantages to keep in mind:

1. Transaction Limits

Federal guidelines may restrict MMAs to six withdrawals or transfers per month, which can be inconvenient for frequent users.

2. High Minimum Balances

Many MMAs require a high minimum balance to open the account or avoid monthly maintenance fees.

3. Lower Returns Than Investments

Compared to stock market or mutual fund investments, money market accounts may offer lower long-term returns.

4. Potential Fees

Failing to meet balance requirements or exceeding transaction limits can lead to fees that eat into your interest earnings.

When To Choose a Money Market Account

A money market account may be the right fit if:

• You want a safe place for your emergency fund
• You prefer easy access to your savings through checks or debit
• You’re holding a large cash balance and want to earn more than a basic savings account offers

Risks of a Money Market Account

Even insured accounts have limitations. These are the risks of a money market account to consider:

• Inflation Risk: Your returns might not keep pace with inflation, reducing your purchasing power over time.
• Fee Risk: Hidden fees and maintenance charges can chip away at your earnings.
• Opportunity Cost: Choosing a money market account over higher-yield investments could mean missing out on better returns.

How Money Market Accounts Compare to Other Savings Options

Compared to other options, money market savings account pros and cons land squarely in the middle, offering better rates than basic savings but less freedom and growth than CDs or investments.

Money Market Account Tips: How To Maximize Benefits

To make the most of a money market account:

• Review rates regularly and switch accounts if better options become available
• Compare rates: Look for the highest interest with the lowest fees
• Maintain the minimum balance to avoid penalties
• Use it for short-term savings goals or emergency funds

Do Your Research on Rates and Fees

You want to maximize and grow your savings. To do so, you need to find the highest interest rate on your money market account.

Make sure you research rates before deciding to invest in your money market. You also want to pay attention to promotional offers that banks and credit unions offer throughout the year.

Also, you don’t necessarily want to pay various fees associated with your money market account. Be certain to ask about fees before opening your account. 

Maintain Minimum Balance Requirements

If your money market account requires you to maintain a certain minimum balance, make sure you can comply with this requirement.

Funds that drop below the minimum balance will likely trigger a penalty. 

Don’t Be Afraid to Switch

You don’t need to stay wedded to the same money market account. Banks and credit unions regularly offer different interest rates on their money market accounts.

Compare these rates and if feasible switch to the carrier providing the higher interest rate. 

Who Should Avoid Money Market Accounts?

While they’re great for some, MMAs aren’t ideal for everyone. You may want to avoid them if:

• You want higher returns and are comfortable with risk (consider ETFs or mutual funds)
• You don’t have enough to meet the minimum balance requirement
• You need frequent access to your cash beyond six withdrawals per month

Final Take to GO: Are Money Market Accounts Right for You?

The pros and cons of money market accounts depend on your financial goals. If you’re looking for a safe, interest-earning place for your emergency fund or short-term savings, and can maintain the minimum balance, an MMA can be a strong option.

But if you’re chasing higher returns or need more flexibility, consider a high-yield savings account or short-term CD instead.

Bottom line: Weigh the money market account advantages against the potential drawbacks and choose the savings tool that fits your lifestyle best.

Information is accurate as of May 22, 2025.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.

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