Can You Write Checks and Pay Bills From a Money Market Account?
Can you write checks or pay bills from a money market account? Understand their transaction rules, limits, and how they compare.
Money market accounts offer a blend of features from both savings and checking accounts, providing a flexible option for managing finances. They generally offer higher interest rates than traditional savings accounts while allowing occasional access to funds. Money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) up to $250,000 per depositor, per institution, ensuring the safety of deposited funds.
Money Market Account Transaction Features
Money market accounts commonly provide direct payment features, such as check-writing and electronic bill pay. Many financial institutions issue a checkbook and a debit card, allowing purchases or cash withdrawals. These accounts also facilitate online bill payments or Automated Clearing House (ACH) transfers for scheduled payments. These transactional tools offer convenience, permitting direct access to funds without needing to first transfer money to a separate checking account.
Understanding Transaction Limitations
While money market accounts offer transactional flexibility, they come with limitations on withdrawals and transfers. Many banks and credit unions limit transactions like checks, online transfers to third parties, and debit card purchases to six per statement cycle. This limit often applies to pre-authorized transfers, telephone requests, and bill pay. Transactions not counting towards this limit include in-person withdrawals, ATM withdrawals, and transfers by mail.
Exceeding these limits can lead to varied consequences, which differ by financial institution. Banks may impose fees for excessive transactions. Repeatedly exceeding the limit could result in account conversion to a checking account or even closure. These measures ensure money market accounts are primarily for savings with limited transactional activity, not as a substitute for a highly active checking account.
Comparing Money Market Accounts to Other Account Types
Understanding distinctions between money market, checking, and traditional savings accounts is important for choosing the right financial tool. Checking accounts are for frequent transactions, offering unlimited withdrawals and easy access for daily spending and bill payments, but typically provide little to no interest. Savings accounts prioritize accumulating funds with higher interest rates than checking accounts, but have very limited transaction capabilities, often similar to or stricter than money market accounts. Money market accounts serve as a hybrid, providing higher interest rates than most checking and some traditional savings accounts, along with limited transactional features like check-writing and debit card access.
They are suitable for individuals seeking a better return on cash reserves while retaining occasional access for larger, less frequent payments. For example, a money market account is appropriate for managing funds for a down payment or quarterly tax payments, where higher interest earnings are beneficial and outgoing transactions are low. Conversely, a checking account remains preferred for managing daily expenses, numerous bill payments, and frequent transactions due to unrestricted access. Many individuals find it beneficial to use both a checking account for everyday spending and a money market account for savings requiring liquidity, transferring funds as needed.