Checking accounts share many traits with money market accounts, which are deposit accounts offered by banks and credit unions. They are both liquid, allowing you to open and close accounts for any time period, and both are insured by the FDIC, meaning your money is covered up to the limit established by the federal government. It is important not to confuse a money market deposit account with a money market mutual fund, which is not FDIC insured. However, checking and money market accounts have some distinctions that make a difference in how you save and spend.
Most checking accounts, including interest-bearing and high-yield checking accounts, allow you to write as many checks and do as many debit card withdrawals you wish in the course of the month. Money market accounts do not offer the same level of freedom. While most of them come with checkbooks and may even include an automatic teller machine card, money market accounts limit you to as few as six transactions per month, with usually only an allotment of three checks. If you attempt additional transactions, you incur a financial penalty.
One traditional difference between checking accounts and money market accounts may be less of a difference in today's environment of innovative accounts. In the past, most checking accounts offered little to no interest, making money market accounts the key winner if you wanted to keep a sizable sum of money in a liquid account. These days, however, some online banks, credit unions and even traditional banks offer interest-bearing checking accounts that earn competitive interest. The catch, however, is that these accounts may have more restrictions than other checking accounts in terms of your minimum balance.
While some consumers worry about bank overdrafts when their checking account balances dip below zero, they may have additional concerns if they have a money market account. According to David McMillin on Bankrate.com, you may need to keep a large amount of money, as much as $10,000 or more, in your money market account to avoid penalties. Even high-yield checking accounts typically offer more flexibility than a standard money market account.
In general, money market accounts have more in common with savings accounts than checking accounts. Money market accounts allow you to set aside money for short-term and long-term financial goals, while offering a small amount of flexibility with check-writing. According to the U.S. Securities and Exchange Commission, money market accounts' restrictions and interest rates make them an option for the conservative part of an investment portfolio, while checking accounts work better as flexible liquid accounts.
Nina Makofsky has been a professional writer for more than 20 years. She specializes in art, pop culture, education, travel and theater. She currently serves as a Mexican correspondent for "Aishti Magazine," covering everything from folk art to urban trends. She holds a Bachelor of Arts in English from Mills College.