What is a money market account?

If you're not sure whether you want the interest-bearing benefit of a savings account or the accessibility of a checking account, a money market account (MMA) combines both.

The best MMAs have APYs that rival those of high-yield savings accounts, but also come with debit/ATM cards and even paper checks.

Find out how money-market accounts work, how to find the right one and how they stack up to other deposit accounts.

A money market account (MMA) is an interest-earning deposit account that combines features of a savings account with the convenience of a checking account. In many cases, account holders can access their funds through ATMs, debit cards or paper checks.

Don't confuse a money market account with a money market fund. A money market account is a bank or credit union deposit account, while a money market fund is an investment account that is not insured by the FDIC or NCUA.

A money market account functions as a hybrid of checking and savings accounts, combining accessibility with a robust APY. Some MMAs allow account holders to write checks, take out cash at the ATM, make a purchase with a debit card or complete an electronic transfer.

Here's how MMAs work:

• Interest. Money market accounts pay interest on the balance, with some offering APYs much higher than traditional savings accounts.
• Deposit requirement. Many MMAs have a minimum opening deposit requirement, typically $1,000 or $5,000. You may also need to maintain a minimum balance to earn a particular APY or avoid a monthly fee.
• Access to funds. While an MMA may come with checks or an ATM/debit card, most limit the number of free withdrawals you can make each month.
• Insurance. Like other deposit accounts, money market accounts at FDIC-insured banks are generally insured by the FDIC up to applicable limits. At federally insured credit unions, deposits are generally insured by the NCUA

When shopping around for a money market account, look for one with a competitive APY that doesn't require a balance you can't comfortably maintain.

Factors to consider when choosing an MMA include:

• APY: A high annual percentage yield (APY) is the obvious place to start, but you should weigh that return against any fees you have to pay, the minimum balance you have to maintain and how easy it is to access your money.
• Account minimum: Some money market accounts, especially with brick-and-mortar banks, require a minimum deposit to open the account or earn an advertised APY. While the minimum is often $1,000 to $2,500, it can be as high as $25,000 for a premium account/
• Monthly fees: Check whether the account charges a monthly maintenance fee and what requirements you must meet to have it waived.
• Access to your money: One of the main benefits of an MMA is easier access to funds. Look at whether the account offers paper checks, an ATM or debit card or electronic transfers. See what, if any, limits there are on withdrawals or other transactions.
• Insurance: Make sure the bank is FDIC-insured or, if the account is at a credit union, NCUA-insured.
• Convenience: If in-person banking is important to you, does the bank have branches in your area? Is it part of a sizeable fee-free ATM network?
• Customer support: Does the bank offer a robust digital experience and helpful customer service hours?

Ally Bank Money Market Account is one of our top picks for a money market account, offering a higher-than-average APY, along with check-writing and a debit card.

The Sallie Mae Money Market Account also has a healthy APY, with no minimum opening deposit, balance requirement or monthly fees. Plus, your first set of checks are free.

The UFB Portfolio Money Market offers both paper checks and a debit/ATM card, so your money remains accessible as it grows. Boost your APY when you pair it with a Freedom Checking account.

Money market accounts and savings accounts have similarities but they differ in how you can access your funds. Money market accounts often come with paper checks and debit cards. At the same time, they may have a higher minimum balance requirement to enjoy an advertised APY or avoid monthly fees.

Savings accounts are generally simpler and have fewer balance requirements, but withdrawing money may be more complicated and take longer.

Both types of accounts can be insured by the FDIC or the NCUA, depending on if your money is with a bank or credit union.

A money market account is primarily designed for saving, while a checking account is designed for everyday spending. Even checking accounts that earn interest typically have much lower APYs than MMAs — although they rarely have balance requirements or transaction limits.

A checking account is a better option if you want to make purchases, pay bills and withdraw cash frequently. If you want a savings vehicle with the safety of being able to withdraw cash in an emergency or for infrequent, predictable expenses, an MMA may make more sense.

A standard certificate of deposit (CD) requires you to leave your money untouched for a set term, anywhere from a few months to five years or longer. In exchange, a CD offers a fixed interest rate for the term, providing more predictable returns.

While a money market account has variable rates, you have more flexibility in accessing your money without paying a penalty.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every savings article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of savings and banking products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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