Money Market Vs. Checking Account: How Do They Compare? (2024)

When deciding where to keep your money, you should consider your personal goals and financial habits. How do you spend? How do you save? What features do you look for in an account?

Money market and checking accounts are often compared to each other because they offer many of the same features, but they differ in some key ways. Depending on what you’re working toward, you may end up using both. Here’s how money market accounts and checking accounts work and some of the best ways to use them.

What Is a Money Market Account?

A money market account (MMA) is a type of savings account that typically pays a higher rate than a standard savings account or checking account.

Many people consider money market accounts to be “hybrid” accounts that combine checking and savings features. Like savings accounts, MMAs often have withdrawal restrictions that limit the number of outgoing transactions you can make per month or statement period. Like checking accounts, you can deposit money into an MMA at any time, and they may offer check-writing capabilities or include debit cards.

Money market accounts may have minimum deposit requirements to open an account and balance requirements for earning interest or avoiding monthly fees. The best money market accounts, however, have low minimum opening deposit requirements and charge no monthly fees.

Because they offer more flexibility than savings accounts and better rates than checking accounts, money market accounts are ideal for short-term savings that you want easy access to.

Money market accounts are deposit accounts and differ from money market mutual funds, which are a type of investment account.

What Is a Checking Account?

A checking account is a transaction account used for daily spending and deposits. You can use it to cover bills and pay for everyday expenses like food and gas and to receive your paycheck and other deposits.

Checking accounts come with debit cards used to make purchases and withdraw cash from ATMs. Most checking accounts also allow you to write checks, schedule automatic transfers and make deposits at any time. The best checking accounts offer extra benefits like ATM fee rebates, cash back, early direct deposit and even interest.

If a checking account earns interest, it may be referred to as an interest checking account.

Traditional Checking Accounts vs. High-Yield Checking Accounts

Earnings rates vary considerably for interest checking accounts. Traditional checking accounts with big banks and brick-and-mortar institutions might pay as little as 0.01% APY, if they pay interest at all, while online checking accounts tend to pay much more.

The best high-yield checking accounts earn competitive rates that far outpace the average and may even compare to money market account rates. However, there may be hoops you have to jump through to qualify for the highest rates, such as maintaining a minimum balance or meeting transaction requirements. This makes high-yield checking accounts more similar to money market accounts than traditional checking accounts.

Money Market vs. Checking

Money market and checking accounts have a number of safety and access features in common, but they vary in how they can be used and what they require of account holders.

Both money market accounts and checking accounts earn variable interest rates that are subject to change at any time, although it’s much less common for checking accounts to earn interest, while money market accounts tend to earn rates on par with high-yield savings accounts. Money market accounts may also limit you to six free withdrawals per month, according to Regulation D.

These accounts also have different minimum deposit and balance requirements. If a checking account has a minimum opening deposit requirement, it is typically less than $100. While some money market accounts have a low or no minimum opening deposit requirement, it’s more common to see MMAs with opening deposit requirements of $100 to $2,500—some even require $5,000 or $10,000 to open an account.

When To Choose a Money Market Account

When you don’t need constant access to your money and you’re focused on saving, money market accounts maximize your interest earnings while keeping funds close. Here are some times when a money market account makes more sense than a checking account:

• You have short-term savings goals. When saving for a new car or a wedding, your money can earn a higher rate in a money market account until you’re ready to withdraw or transfer it.
• You want to build an emergency fund. For unexpected expenses such as hospital visits and urgent repairs, accounts that offer high liquidity are best. Money market accounts make it easier to access your cash for emergency spending than other savings accounts.

When To Choose a Checking Account

Checking accounts may offer more flexibility but low or no interest, so they’re ideal for cash you plan to spend rather than save. Here are a few cases when these transaction accounts come in handy:

• You have money you plan to use in the near future. When you know you have charges coming up, it’s smart to keep the money you’ll need in a checking account so you can easily pay for them without having to worry about transaction limits.
• You can’t meet balance or deposit requirements. Checking accounts tend to have low or no balance and deposit requirements compared to money market accounts, letting you avoid the stress of meeting minimums.

You may decide to put money for rent, groceries and recurring expenses into a checking account and send the rest to a money market account to save for goals. This way, you get the best of both worlds.

For money you’re going to spend, consider a fee-free checking account with practical benefits like convenient ATM access and automated saving. For money you plan to save for now but might need soon, consider a money market account with minimal fees and balance requirements you can easily meet.