Money Market Vs Checking Accounts: Which Is Better For You?

Last Updated: August 21, 2019
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Both checking accounts and money market account (MMs) considered as a safe, reliable and solid investment. However - there are a couple of differences between them you have to understand before getting a decision. Checking vs Saving Accounts - which of them is the right investment for you?

What is a Money Market Account?

Kind of like a hybrid between a savings account and a checking account is a money market account. They actually earn interest in the same way as your savings. And sometimes you get better rates, though that’s going to be dependent on the specific institution.

On the other side of things, you’ll usually be able to write checks and you could have an ATM card. That means you can access your money easily. All you need to do is ask for these things to get them.

How Does It Work?

With a money market account, you’re generally earning better interest than a savings account.

What’s really great about these is they work well for medium length plans. If it’s going to take at least a few years but not quite a decade you can use a money market account. Saving for that down payment is one reason you might want one. It will help you earn a bit more interest but you don’t need it right away.

When it comes to these accounts though, you’re going to have a few rules in order to get the benefits. Most banks are going to require you to have some kind of minimum, for example. That means you’re going to need to maintain a specific balance or you could incur fees. For some accounts it’s only a few hundred dollars (or less) for others it might be thousands.

What is a Checking Account?

A checking account, on the other hand, is what you use for normal transactions. This account gives you continuous access to your account. You get to use checks, debit cards and more. In fact, you can even manage your account online. Plus, you’re going to have freedom to transfer money, make payments or deposits and even pay your bills.

Most people get a checking account before they get any other. They give you access to other types of accounts like savings and investment as well.

How Does It Work?

When you do anything with your checking account it’s usually going to be super easy. You can use any of a number of different methods, like:

  • ATM – With these you can withdraw money anytime you want. And ATM’s are located just about anywhere you go. Keep in mind you may have to pay fees for out of network ATM’s.
  • Debit Card – With this card you can pay for anything you want directly out of your account. You can only spend up to the amount that’s actually in the account as well. Plus they’re totally free when you get an account.
  • Checks – Not a whole lot of people still use checks but they’re definitely effective. They work the same way as a debit card, taking money directly and immediately out of your account. These are generally going to cost money, though the first pack may be free.
  • Bill Pay – For some banks, this is another free service. You’d be able to set up automatic withdrawals to pay any bills out of your checking.
  • Online Banking – If you’re more at home on the computer or a mobile device you can use them to manage your banking. Online banking lets you be in control of anything and everything. You can pay bills, deposit checks, transfer money and more.

Comparing a Money Market Account and a Checking Account

Checking AccountMoney Market Account
PurposeGeneral spending and financial needsEarning interest faster than a savings account
Access your fundATMs, debit cards, checks, bill pay, transactions, and transfersATMs, debit cards, checks
Minimum BalanceUsually $25 or moreUsually $1000 or more
InterestLittle – NoneAbout 2.5% (as of March 2019)
Withdrawal RestrictionsDaily limit – None3-6 per month
Fees

 

monthly maintenance fee + ATM withdrawalLittle to none
protectionup to $250,000 per account holder by FDICup to $250,000 per account holder by FDIC

MMA: Get More Interest

A money market account is going to offer higher interest than a checking account.

In general, you’re not even going to get any interest on a checking account, even if you have a lot of money in there. If you really want something though you may be able to shop around a bit.

MMAs Minimum Balance is Higher

With a money market account, you’ll usually have a higher minimum. That means you’ll need to have a set amount in your account at all times and it could be $1,000 or more.

With a checking account, you usually have a minimum daily or average balance. These are as low as $25 per day.

Access Your Funds

If you need a way to access your funds you’ll want to look at the options here. With a money market account, you can generally write checks and you can use an ATM card or a debit card. What you’ll find are federal limits on the number of transactions.

On the other hand, a checking account gives you options for checks, ATM, branch withdrawals, debit cards and online banking.

Monthly Fees

In a money market account a bank is going to make money off how much interest they actually make on the loans they’re using your money for versus how much they give you. That means they’re going to have very few fees because they’re making money elsewhere.

For some checking accounts, you’ll be able to get a fee-free option, but there are fewer and fewer of those around. That means you could have a maintenance fee. The only good thing is that there’s usually a few rules or ways to avoid that maintenance fee. A daily minimum, a monthly average or set direct deposit could negate the fee. On the other hand, you could have fees for ATM’s that are outside your network.

Limits on Withdrawals

With a money market account, you’ll generally have only 6 transactions and withdrawals in a month. Anything over that is going to mean you have to pay money and it could be more money than you’re even making.

For a checking account, you’re not going to have a limit to the number of withdrawals you want to make.

The only limit is the amount of money that’s taken out by debit card, $1,000. ATM withdrawals per day are generally about $500. With checks, you generally don’t have a limit, but you should check with your financial institution.

Safety Features

No matter which accounts you choose you is going to have methods to keep you safe. A financial institution provides you with some protection, after all. First, they have to keep your personal and financial information protected from outside forces. Second, they have to ensure your account up to $250,000 under the Federal Deposit Insurance Corporation. And that protection is completely free and automatic.