Money market accounts (MMAs) and checking accounts are two popular types of deposit accounts. Each varies in terms of purpose, features, benefits, and drawbacks. Use the guide below to determine if a money market account or checking account better suits your financial goals.

What is a checking account? 

A checking account is a type of deposit account designed to help you manage your money, from transferring funds to other accounts to withdrawing and depositing money. Checking accounts provide easy access to funds through debit cards, checks, and online and mobile banking. Each checking account is also insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

 Common checking account features.

Unlike savings or money market accounts, checking accounts typically don’t accrue interest. However, there are no limits on the frequency or amount you can deposit and withdraw. Another common feature of checking accounts is the ability to enroll and use Zelle^®. Zelle^® is a convenient way to send and receive money with friends, family, and others you trust, even if they bank somewhere different than you.¹

Most banks require a low minimum deposit to open a checking account, although some may waive this requirement. Others require checking account holders to maintain a minimum balance each month to avoid a monthly service or maintenance fee. In many cases, waiving this fee requires a set number of transactions, a minimum threshold of funds received, or other requirements that account holders can typically meet through normal use.

Beyond monthly fees, account holders should also be aware of other potential penalties. For example, some checking accounts charge fees associated with overdrafts or using out-of-network ATMs. Banks may also charge a minimal fee for additional types of financial services, like wire transfers, cashier’s checks, or notary services.

Checking account pros and cons.

A checking account is likely one of the first bank accounts you’ll open. These deposit accounts are a powerful tool for managing your money. Explore the advantages and disadvantages of checking accounts below and review them as you discover how checking accounts differ from money market accounts.

Pros

• Low opening deposit required
• Convenient, flexible access to funds
• ATM access, check-writing capabilities, and debit card privileges
• Set up paycheck deposits and automatic payments
• Use Zelle^® to send and receive money

Cons

• Little to no interest earned on balances
• Minimum requirements regarding balance or number of transactions may be necessary to waive monthly service fees
• ATM, overdraft, and bounced check fees apply

What is a money market account?

Money market accounts blend features common to checking and savings accounts. However, they typically offer a higher interest rate than most checking accounts and even rival the competitive interest rates of high-yield savings accounts. With your new money market account, you’ll have limited access to your funds, including writing checks, accessing your funds with a debit card, and withdrawing money from an ATM—all while the FDIC safeguards your account funds up to $250,000.

Common money market account features.

Interest rates on money market accounts are typically variable or fixed, depending on the corresponding terms. In addition, interest rates usually depend on how much you deposit into the account. Tiered interest rates reward account holders for depositing more money with higher interest rates as the amount increases.

With a money market account, you can write a set number of checks per month to manage your funds. You are also limited to a set frequency of no-fee withdrawals per month. Exceeding this limit can incur a penalty or result in the money market account being downgraded to a standard savings account. 

When opening a money market account, you must meet a minimum opening balance threshold, which varies by bank. Some money market accounts also come with a minimum required balance that you must maintain to avoid a monthly service or maintenance fee. These restrictions and penalty fees are often described in the terms and conditions of the money market account, so it’s important to review them carefully before opening an account.

Money market account pros and cons.

Money market accounts can promote savings habits by limiting access to funds. However, they may not be the right money management tool for everyone. Consider the following pros and cons of money market accounts and compare them to the advantages and disadvantages of checking accounts to determine which is right for you.

Pros

• Higher interest rates
• Funds are accessible via debit cards, checks, or ATM cards
• Promotes building up emergency savings

Cons

• Opening balances tend to be higher than those required for checking accounts
• Higher minimum balance requirements to obtain desirable interest rates
• Exceeding the number of permitted withdrawals can incur penalty fees

How to choose between checking and money market accounts.

Money market accounts are designed to earn interest on balances you would otherwise hold in a checking account. However, they’re typically best for account holders who don’t access their money as often or who want to trade transactional flexibility for a higher rate of return. If abiding by the transaction limits seems feasible, money market accounts can help you earn interest on money that would otherwise sit idle.

In contrast, checking accounts offer the most flexibility, with easy access to your money. Checking accounts are ideal for those who haven’t yet managed a deposit account because they’re geared more toward money management than savings. In addition, checking accounts cater to those who aren’t able to meet strict minimum balance requirements, regardless of the reason.

How do you decide between a checking and a money market account? Consider your answers to the following questions:

• Do your financial goals include building an emergency fund or affording everyday expenses? 
• How often do you want to access your funds? 
• How important is it for you to obtain a higher interest rate?
• Which account and corresponding terms make the most sense to you?

Here’s one final question: What if you didn’t have to choose between a checking and money market account? As long as you can comfortably comply with the terms of both accounts, you can open one of each and maintain them for as long as you like.

Open a checking and money market account today.

Checking and money market accounts can help you achieve your financial goals. However, you must first understand their purpose, features, advantages, and disadvantages. Contact Popular Bank today to open a checking and/or money market account to start working toward your money-related goals.

Open a checking account

Open a money market account