How to Open a Money Market Account

Opening a money market account takes five steps, and most banks and credit unions let you do it online. The step that matters most comes before you apply: matching the account’s minimum balance to what you can keep in it. Many money market accounts charge a monthly fee if you drop below the minimum, so the highest rate isn’t always the best deal.

What is a money market account?

A money market account (MMA) is a type of savings account offered by banks and credit unions. You can deposit and withdraw money like you would with regular savings. Rates can be higher than a traditional account, and many MMAs also let you access your money with a debit card or limited number of checks.

Money market account or money market fund? They sound alike, but they’re different products:

• A money market account is a deposit account at a bank or credit union. It’s FDIC- or NCUA-insured up to $250,000, the same as your checking and savings.
• A money market fund is an investment you buy through a brokerage. It isn’t FDIC- or NCUA-insured, and its value can drop, so you could lose money.

5 steps to open a money market account

1. Compare APYs

Compare rates at your own bank, at least one credit union, and at least one online bank. Rates can differ a lot from one account to the next, and they can go up or down with the market, so check them when you’re ready to open an account.

Look closely at annual percentage yields, which include compounding.

2. Check minimums and fees

Some money market accounts don’t require a minimum, while others might require $500, $1,000, or more to open the account or get the highest advertised APY.

Look for two numbers in the account disclosures: the minimum to open the account, and the minimum to avoid a monthly fee. Pick an account whose minimum you can comfortably stay above. If you can’t, a high APY can end up paying less than the fees or penalties cost you.

3. Gather your information

Most applications ask for:

• Your full legal name, date of birth, and address
• Your Social Security number (some banks accept an ITIN instead)
• Your phone number and email
• A government-issued photo ID
• A way to fund the account, usually the account and routing numbers for your current bank or a debit card

You can also choose who owns the account, whether in your name alone or jointly with another person, and whether to name a beneficiary.

4. Apply online or in person

Most banks let you apply online, and banks with branches usually let you apply in person, too. At a credit union, you have to become a member first. Membership is often based on where you live, work, or go to school, and some credit unions ask for a small opening deposit to join.

5. Fund your account

Once you’re approved, make your opening deposit, enough to meet the minimum. An electronic transfer or ACH transfer from your current bank can take a few business days to arrive. You can add more to your account whenever you’d like.

Run the numbers >> Use Kikoff’s compound interest calculator to see how your balance grows over time and what compounding adds to the total.

What to look for in a money market account

APY and tiered rates

Some MMAs pay tiered rates, either a higher APY on larger balances or the advertised APY only above a set amount. Check which tier your balance actually falls in. MMA rates are variable, so the bank can change yours after you open the account.

Fees and minimum balances

Monthly fees often kick in when your balance drops below the minimum. Even $5 a month is $60 a year, which can be more than a small balance earns. Check the account fee schedule for maintenance, excess withdrawals, and paper check fees.

Access and withdrawal limits

Checks and a debit card make an MMA easier to tap than regular savings, but that doesn't make access unlimited. Until 2020, a Federal Reserve rule limited certain withdrawals and transfers from money market and savings accounts to six a month. The Fed dropped that cap, but it doesn't require banks to drop their own limits, and some still have them. The account agreement lists the limit and any fee for going over.

FDIC or NCUA insurance

A money market account at an insured bank or credit union is protected if the institution fails. Deposits at FDIC-insured banks are covered up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category. The NCUA applies the same limits to federally insured credit unions.

That limit is shared, however. If your money market account, checking, and savings at one bank are all in your name alone, they share one $250,000 limit.

If you open a money market account through an app that isn’t a bank, FDIC insurance covers the partner bank holding your money, not the app company. To check, look up any bank in the FDIC’s BankFind Suite, or any credit union in the NCUA’s Credit Union Locator.

Read more >> Are Money Market Accounts FDIC-Insured?

At a glance: Money market vs. savings vs. high-yield account

An MMA and a high-yield savings account can pay similar rates, so compare the APYs directly. Choose the MMA if you want to write a check or use a debit card on your savings and can keep the minimum. Choose high-yield savings if you'd rather have no minimum and don't need those extras.

For money you won’t need for a while, a CD locks in a rate over a set term, helping you to know exactly how much you’ll earn.

Read more >> Are High-Yield Savings Accounts Safe?

Do you need good credit to open an MMA?

No. Opening a money market account doesn't involve a hard credit check or a credit score requirement. Many banks check your ChexSystems report instead, which tracks your banking history, like accounts closed with a negative balance or unpaid overdrafts. For an MMA, a clean ChexSystems record matters more than your credit score.

You can check your own record for free. Request your ChexSystems report before you apply. If something on it is wrong, you can dispute it directly with ChexSystems.

Opening an MMA won't help or hurt your credit. Your credit score is built from your payment history on accounts that report to the credit bureaus, like loans and credit cards.

While you're checking your banking record, check your credit reports too. They're free weekly at AnnualCreditReport.com. To keep an eye on changes between checks, Kikoff Credit Monitoring can help.

Bottom line

Opening a money market account takes five steps. Compare APYs at a bank, a credit union, and an online bank, choose a minimum you can keep, and check the fees and withdrawal limits before you fund it.

You don't need good credit to open a money market account, but you will for the next loan or credit card you apply for. And it’s your credit that sets the rate and gets you approved. A Kikoff Credit Account reports your on-time payments to all three credit bureaus, so you can build that history before you apply. There's no credit check to sign up, and plans start at $5 a month.