Money market account vs. checking account

If you’re looking for a new bank account that allows you to easily store and access your cash, you might be thinking about choosing between a money market account and a checking account. But which one should you choose? Both types of accounts have their pros, depending on your savings and spending goals.

“Think about how you’ll be using the money within the account,” says Jill Emanuel, lead financial coach at a financial coaching business. “Is this money for daily, weekly or monthly use? Or is it money that will not be needed regularly?”

You’ll likely need a little more to go on before answering the question, “How do I decide between a money market or checking account?” We’re here to help.

Our guide, “Money market account vs. checking account,” takes a look at both types of accounts to help you decide which one could be right for your financial plans. You’ll also learn whether using both accounts could make sense for your money mix.

Opening an online checking account is a simple process that lets you manage your money online. Once your account is open, you can write checks, make purchases with a debit card and use the funds you deposit. That debit card can also be used to withdraw cash from the account at an ATM. Finding a place to withdraw money is a breeze with Capital One since you have access to 70,000+ Capital One and partner ATMs.

When deciding between a money market account and a checking account, Emanuel says most people use a checking account to manage their monthly income. This includes depositing part of their paycheck and covering daily expenses. “A checking account makes the most sense as the account where the majority of your transactions occur,” she adds.

A checking account typically comes with an unlimited number of transactions. You can use it for activities like withdrawing cash from an ATM, transferring money to savings or making purchases with your debit card. For example, opening a 360 Checking account with Capital One is easy enough to do in about 5 minutes, so you can get back to what matters.

A checking account can serve as a home base for your finances and gives you quick, easy access to your money. However, these accounts typically earn little to no interest. This is one of the main differences to consider when comparing a money market account and a checking account.

When comparing a money market account and checking account, think of a money market account as a savings vehicle that allows you to earn interest on the balance you keep in the account.

“A money market account is an interest-bearing bank account that typically has a higher interest rate than a checking account,” says Bola Sokunbi, founder of a personal finance education website.

With some money market accounts, you can even earn more interest with a higher balance. Thanks to its potential to earn interest, a money market account can be the right choice if you have certain savings goals and priorities.

If you’re choosing between a money market account and checking account, you may notice that a money market account works much like a savings account by helping you earn interest. However, it may also offer some checking account features, such as check-writing or debit card access.

With some money market accounts, for example, you can withdraw cash from an ATM and use a debit card or checks to get money from the account. There are no limits on ATM withdrawals or official checks mailed to you.

Don’t need regular access to your funds and want your money to grow until you do? Then a money market account could be right for you.

As part of our guide, “Money market account vs. checking account,” here are some examples. These will help you decide which account may best suit your current needs and goals:

• You want to keep your funds liquid (meaning you want access to them at any time). If you’re considering a money market or checking account, know that a checking account is built for regular access to your funds. “If you plan to use your account for monthly bill payments and daily transactions, you would be better suited with a checking account, as these support daily and frequent use,” Sokunbi says. Think rent, cable, utilities, groceries and gas. Tip: It’s quick and simple to pay for your groceries or coffee by just tapping your Capital One contactless debit card at the register.

• You want to deposit and withdraw without a balance requirement. If you do your research when comparing the difference between checking and money market accounts, you’ll find that some checking accounts don’t require a minimum balance. However, you may be required to maintain a minimum balance (and potentially a higher one) with a money market account to avoid a fee. If you’re accessing your money frequently and need to make large withdrawals, consider the benefits of a no-fee checking account. Capital One 360 Checking accounts are fee-free: Add in no minimum balance requirements and you have more money in your wallet.

• You want to earn interest. “If your money is just sitting there, it should be earning money,” Emanuel says. “I spoke with a woman recently who told me she’d had around $50,000 sitting in her checking account for at least the last 10 years, if not longer. If that money had been in a money market account for the same period of time, she would have earned thousands of dollars on it. Instead, she earned nothing,” Emanuel says.

• You want to put short-term savings in a different account. If you have some short-term savings goals in mind, you may benefit from keeping your savings separate from your checking account, so you don’t dip into it for a different purpose. “A money market account can be a good place to keep money you don’t need to access frequently. It may be useful for goals like building an emergency fund, saving for a vacation or setting aside money from an inheritance or home sale,” Emanuel says.

• You need an account to fund your overdraft protection. If you’re comparing a money market account vs. checking account, consider that a money market account could also cross over to support spending goals. One way is through overdraft protection. If you enroll in overdraft protection for your checking account, for example, you could specify that funds be pulled from your money market account to cover a negative balance.

Have both spending and saving needs? Consider using both types of accounts if you have needs from the checking and money market account lists above.

“Personally, I use my checking account for bill payments, my day-to-day spending, writing checks and for any automatic debits I have each month,” Sokunbi says. She’s added a money market account to the mix “because of the higher interest rate, to store my savings for short-term goals, for investing or for money I’ll be needing soon.” Maybe it’s not about choosing between a money market account and a checking account. Instead, it may be about finding an option that gives you the best of both worlds.

Before opening a money market account or checking account, research your options and compare what different banks offer. Consider fees, customer service and interest rates when making your decision. You should also think about how easily you need to access your money and which features best fit your needs.

Choosing between a money market account and a checking account depends on how you plan to use your money. In some cases, using both accounts can help you balance access to your money with your savings goals.

• Checking accounts are ideal for frequent transactions, such as paying bills and making regular purchases like groceries and housing needs. 

• Money market accounts can help your savings grow while still giving you access to your funds. 

• The right account choice depends on your goals, including how often you need your money and whether you want to earn interest.

You can open a 360 Checking or 360 Performance Savings account online in about 5 minutes.