A money market account can be a smart way to grow your savings while keeping your business funds accessible. They typically give you higher interest rates than standard business savings accounts and allow you to withdraw funds, which makes them ideal for managing a positive cash balance.
Whether you’re setting money aside for taxes, payroll, or to send money home with Remitly, a money market account gives your funds room to grow while keeping them within reach. Here’s our guide to this type of bank account.
Money market accounts: the basics
A money market account is a type of interest-earning deposit account offered by banks and credit unions in the US. It combines features of savings and checking accounts to give you a balanced option for managing your business’s money.
These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Association (NCUA), which helps to protect a specified amount of your balance.
The funds that you deposit into a money market account will usually earn interest at a higher rate than a standard savings account. That does mean it’s often more difficult to access your funds, but some banks allow you to withdraw money through checks or debit cards.
Considering how they earn interest and how access to the funds might be limited, it makes sense that many small business owners in the US use money market accounts to store larger sums that could cover things like surprise expenses or asset purchases.
How money market accounts differ from other types of bank accounts
Money market accounts share some features with business checking and savings accounts, but they’re structured a little differently. They usually offer higher interest on your balance, have limits on how much you can withdraw, and may have higher minimum balance requirements for opening an account.
Here’s how they typically differ from some other common types of bank accounts for small businesses in the US:
- Checking accounts don’t usually earn interest as they’re designed for frequent transactions, including deposits, withdrawals, payments, and transfers.
- Savings accounts allow you to earn interest but limit access to your funds and don’t usually allow you to access your money via checks or debit cards.
- Certificates of Deposit (CD) offer fixed interest rates over a set term, so you can’t access your funds until the deposit matures.
So money market accounts can be a good option for storing funds that you don’t need for daily transactions.
Money market funds vs money market accounts
While money market accounts are deposit accounts, money market funds are investment products offered by brokerage firms that invest in short-term, high-quality debt securities like US Treasuries.
Like money market accounts, money market funds are intended to help holders maintain their capital and earn interest to grow their investment, but they’re not insured by the FDIC or NCUA. They may be covered by the Securities Investor Protection Corporation (SIPC). They’re fairly low-risk, but a bit riskier than money market accounts because their value fluctuates based on market conditions.
| Feature | Money market account | Money market fund |
| Offered by | Banks and credit unions | Brokerage firms and mutual fund companies |
| Insurance | Yes, up to $250,000 USD by the FDIC or NCUA |
Not FDIC or NCUA insured; SIPC cover may apply |
| Access to funds | Limited; some financial institutions offer access via check or debit cards | Can only be accessed by selling shares |
| Interest earnings | Fixed or variable, based on chosen financial institution | Returns are based on fund performance |
| Risk level | Low (insured) | Low to moderate (based on market fluctuations) |
| Usually used for | Short-term savings | Usually short-term investments, though they can be longer |
How does a money market account work?
Understanding how money market accounts work can help you to decide if this type of account is the best fit for your business. Whether it’s how interest is calculated or the types of transactions you’re allowed to make, the details matter—especially when you’re trying to make the most of every dollar.
Structure and functionality
Money market accounts are structured for security and flexibility, which can make them a better option for holding your business savings than a typical business savings account.
Your funds are held at a bank or credit union and are insured for up to $250,000 USD by the FDIC or NCUA. You also earn interest on your balance, which is typically calculated daily and paid into your account each month. On top of that, some financial institutions offer check-writing or debit access, which makes it easier to move or access money when you need to.
This setup can be really helpful when you own a small business. For example, let’s say you run a catering company. You could deposit income from a large event and let it earn interest until you have to pay your creditors. Your money will grow in the meantime, so you have more to invest in your operations.
Interest rates and earnings
Money market accounts typically offer higher interest rates than standard business or checking accounts. The best of these accounts could give you annual percentage yields (APYs) ranging from 3.6% to 4.4%, though this of course depends on the bank you choose, and might depend on your account balance.
That’s a lot better than most business checking accounts, which typically offer interest rates averaging between 0% and 0.2% APY at time of writing, though there are some rare exceptions. While business savings accounts offer slightly better rates than checking accounts—some high-yield options go up to 4.8% APY—many banks’ rates are still below 1% APY.
Pros and cons of money market accounts
As we’ve said, a money market account can give you a great mix of flexibility and growth potential when it comes to your money. But they do come with some trade-offs. Knowing what the advantages and limitations are can help you compare bank accounts to decide which is best for your business.
The benefits of money market accounts
High interest rates
One of the biggest draws of this type of account. That interest might not seem like much at first, but over time, it can accrue to a substantial amount. This can help you to cover unexpected expenses or act as a nest egg for any expansion strategy you might have for your business.
Ease of access
Accessibility is another plus. Even though it gives you investment-level yields, a money market account doesn’t tie your funds up for the long term. You can usually make withdrawals, move money, write checks or use a debit card to make withdrawals, which makes it easier to respond to everyday business needs.
Imagine you sell cool T-shirts on an online marketplace. You’ll receive payments from your clients for your creations, but you only need to pay your suppliers 60 days after placing an order with them.
When your clients pay you, you transfer the money directly to your money market account instead of leaving it to sit in your business checking account. This allows it to earn interest until the time comes that you need to pay your suppliers. That could make the difference in upgrading your packaging to give your customers a better buying experience.
Security
Another benefit is that, because of the FDIC or NCUA insurance, your funds are protected. If anything did go wrong in the 60 days between ordering supplies and having to pay your creditors, you’d be insured for up to $250,000 USD.
Disadvantages of money market accounts
Money market accounts offer flexibility and high interest rates, but they’re not without their drawbacks—especially if you’re a small business owner working within tight margins, or you need to manage variable cash flow.
One big limitation is the minimum balance requirement. Many banks require you to keep a certain amount in the account to avoid monthly fees or earn the advertised interest rate, which might mean that some of your funds are permanently tied up.
Transaction limits can also be an issue. Although some accounts come with check or debit access, there are usually caps on the number of withdrawals you can make each month. Exceeding these limits can lead to penalties or account restrictions so this is something to consider when you’re choosing an account provider.
There are also a couple of risks. While they’re generally pretty safe, your returns aren’t guaranteed to keep pace with inflation and, if you hold an account with an institution that’s not FDIC- or NCUA-insured, your deposits could be lost if something goes badly wrong at the institution.
Making an informed decision
A money market account can be a great tool for small business owners looking to grow their money while keeping it within reach.
By understanding how these accounts work—and knowing how to weigh their benefits and limitations—you can make an informed decision that supports your business’s financial health in the long term.
FAQs
What’s the catch with a money market account?
Although they usually offer better interest than other types of accounts, you might need a relatively high minimum balance to earn that interest or avoid fees. Many banks also limit the number of withdrawals you can make in a month and exceeding these can result in high fees or potential restrictions.
How much will $10,000 USD make in a money market account?
How much money you’ll make on a $10,000 USD deposit in a money market account will depend on the APY on your account, and the length of time you can leave the money untouched. For example, at 4% APY, you could earn $400 USD per year if you didn’t make any withdrawals.
Can you withdraw money from a money market account?
Yes, it’s possible to withdraw money from a money market account. Many banks offer check-writing privileges or debit card access. That said, there may be limits on the number of withdrawals you can make—and exceeding these could result in additional fees or penalties.