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What is a money market account?

Discover what a money market account is, its key benefits and how to take advantage of higher interest rates to meet your personal savings goals.

8 min. read

We all know that saving money is important, but where’s the best place to put those hard-earned dollars? How can you know for sure that your money is safe and secure?

A money market account can offer that security, and helps your money grow with interest. That means you’ll get the peace of mind of a traditional bank account, while also making your savings work harder for you.

So how does a money market account work? And is it the right choice for you? Read on to find out more.

What’s a money market account?

A money market account is a type of savings account that earns interest. It functions like most savings accounts you can find at a bank or credit union. You put money in, then withdraw funds when you need them. Money market accounts may also offer a competitive interest rate, so your funds are doing more than just sitting around — you’re constantly earning interest on the balance of your account.

What’s the difference between a money market account and a savings account?

While money market accounts and savings accounts have a lot of the same features, there are some key differences. One important difference is that money market accounts often offer higher interest rates than traditional savings accounts.

Debit cards or checks can also come with a money market accounts. This can make it more convenient to access your savings. Make sure you check with your financial institution regarding any limits on transactions with their money market account. Some may limit the number of certain types of withdrawals during a statement period. 

How do money market accounts work?

Money market accounts are offered by banks and credit unions. The basics are simple: you deposit money into your account, your balance earns interest, and you withdraw the funds as you need them.

When you’re first starting out with a money market account, keep in mind that some banks require a minimum deposit to open an account. At BMO, you can open an account for as little as $25.

You might also need to maintain a minimum balance in your money market account and other bank accounts. Your bank may charge a fee if your daily balance dips below a set point during a statement period.

After you deposit funds into your account, you’ll begin earning interest on your balance. Money market account rates are often tiered, meaning the higher the balance, the higher the rate you may earn on your money. Your interest rate will be variable, which means it changes over time as the market fluctuates. You’ll typically receive interest payments each month, though timing may vary from bank to bank.

If you need to use your money, your money market account offers more options than a traditional savings account. You can make an electronic transfer or use a debit card or checks to withdraw funds. Keep in mind, banks may limit your withdrawals and transfers to six monthly.

When it’s tax time, you’ll need to remember your money market account. You’ll need to pay taxes on the interest you’ve earned over the year, just like with other earned income. This is the same as interest earned on a regular savings account.

How much interest can a money market account earn? 

Money market accounts offer competitive interest rates that are often higher than what you see with a traditional savings account. 

As of August, 2023, the national average interest rate for savings accounts is 0.43%. The average interest rate for a money market account is 0.62%. footnote star

At BMO, you could earn a higher rate when you bundle your Relationship Plus Money Market account with a BMO Relationship Checking account.


“A money market account can be a smart way to save for your short and long-term goals. They offer a safe place to store your money outside your checking account, while also using the power of interest to make your money work harder for you.”

What are the benefits of a money market account 

Money market accounts can be a smart and safe way to save toward your financial goals — all while making your money work harder for you.

  • Flexibility: Money market accounts make it easy to access your money when you need it. Many banks let you tap into your funds with checks or a debit card, like a regular checking account. Transaction limitations may exist, so be sure to check with your bank regarding how many times you can perform certain types of withdrawals during a statement period.  
  • A competitive interest rate: With a money market account, you’ll earn interest on your account balance. The rate for these accounts is often higher than it would be with a traditional savings account.
  • Peace of mind: Rest easy knowing your savings are FDIC insured. Unlike certain types of investments, your money market account deposits will be federally insured up to a set amount. 

What are the best ways to use a money market account?

A money market account can be a smart way to save for your short and long-term goals. They offer a safe place to store your money outside your checking account, while also using the power of interest to make your money work harder for you.

Here are a few of the best ways to use your money market account:

  • Start or build your emergency savings fund.
  • Save for a big purchase, like new home appliances or a new car.
  • Save for a major life event, like a wedding or dream vacation.
  • Put money away for a down payment on a new home.
  • Add a little extra to your long-term savings or retirement fund.

While there are many benefits to a money market account, they aren’t the best option for every financial situation. For example, a money market account may come with transaction limits, making them not ideal for everyday banking. Your checking account is the best option for your day-to-day transactions and purchases. 

Also, money market accounts come with a variable interest rate that may change over time. If you’re looking for an account with a fixed rate, a certificate of deposit may be a better option. Finally, many money market accounts have a high minimum balance requirement. If you’re not sure how much you’ll be able to keep in your account each month, you may want to consider a traditional savings account.

Money market account FAQs

Have more questions? We’ve got some answers. Here are some of the most common inquiries we hear about money market accounts.

Are money market accounts insured?

Yes, money market accounts at banks are federally insured. The FDIC protects certain types of accounts, such as money market accounts, up to a set amount per depositor per bank. Visit the FDIC’s website for current deposit insurance limits.

Keep in mind that all your assets at a bank count toward that insured limit, including any funds in other insured accounts like savings accounts, checking accounts, and certificates of deposits.

If the worst-case scenario were to happen and your financial institution failed, the federal government would reimburse your assets in insured deposit accounts based on the current deposit insurance limits.

Are money market account rates fixed?

Money market accounts typically offer a variable interest rate. These types of rates rise and fall based on inflation and market fluctuations. This is how interest works for similar financial products, such as savings accounts and mutual funds. 

Another important factor that will ultimately affect your returns is when the interest is compounded. Depending on your financial institution, the interest may be compounded daily, monthly, or yearly.

What do you need to open a money market account online at BMO?

  • Your phone number, email address and U.S. residential address
  • Your date of birth and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
  • U.S. citizenship or status as a U.S. Resident Alien (if neither applies to you, you can apply over the phone or in person at a BMO branch)
  • A routing and account number from your other bank so that you can start adding money to your account

The bottom line

If you’re looking for a safe (and smart) way to save your money, a money market account can be a great option. They offer the security of a savings account, with the added flexibility of easy access to your funds. Plus, you’ll earn interest on any funds you put in your account. It’s the best of both worlds — you’ll get the peace of mind that your savings are secure, while also knowing you’re making your money work harder for you.

Accounts are subject to approval and are provided in the United States by BMO Bank N.A. Member FDIC

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