MMA Checking vs. Traditional Checking

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Contributor, Benzinga
May 15, 2019

There’s no question that you need a place to park your money. You might choose to open a money market checking account or a traditional checking account. We don’t recommend that you just stash it under your mattress.

It’s got to go somewhere, even if it’s just in a temporary holding location before you pay bills or fund your Roth IRA.

We’ve consulted with various financial resources to explore these checking account options to help you decide if opening one is a good idea for you.

Money Market vs. Traditional Checking: Overview

Here’s a chart outlining a few differences between money market checking and traditional checking accounts.

Type of AccountMinimum Deposit RequiredWithdrawal LimitInterest-Bearing
Money market accountYesYesYes
Traditional checking accountYesATM onlyVaries, but typically not

What's a Money Market Account?

A money market account is a type of checking account. This type of account is a good choice if you’re planning to deposit a sizable chunk of money as they usually pay a higher interest rate than a checking account. Money market accounts also good if you’re saving money for a large purchase, such as a down payment on a house or college tuition.

According to the Consumer Financial Protection Bureau (CFPB), there are limited withdrawals on money market accounts. You can’t withdraw money or make payments more than 6 times a month from a money market account using a check, debit card, money order or electronic transfer

What's a Checking Account?

Writing checks can be useful for paying bills, as checks serve as an automatic record and proof you’ve paid for something in full. They’re also convenient because you can pay for goods and services online using your checking account or use a bank-issued debit card.

A debit card allows you to withdraw money from your checking account using an ATM or making payments, which are automatically deducted.

Money Market vs. Traditional Checking: Who Are They For?

Anyone can open a money market or traditional checking account, though there may be age restrictions in some instances. Both money market and traditional checking accounts offer different features and requirements.

If you rarely write checks and want to save money on an account with interest, a money market account is a good choice.

If you need an account you can pay bills via check or online, a traditional checking account is your best bet. Money market accounts can function as a savings account or a checking account because you can use it to write a limited amount of checks each month.

Money Market vs. Traditional Checking: Interest Rates

Most traditional checking accounts are not interest-bearing. However, some banks offer a few exceptions. For example, Bank of America offers a Relationship Banking account (a money market checking account). The following restrictions and/or features apply:

  • A minimum deposit of $100
  • $25 monthly maintenance fee
  • Interest ranges from 0.03% to 0.06%, depending on the deposit amount

The amount of interest earned on money market accounts depend on the current balance maintained and your bank’s established requirements. According to the Federal Deposit Insurance Corporation (FDIC), the average interest rate for money market accounts is 0.09%.

For example, if you deposit $150,000, your money market account would yield $135 in interest per year.

Money Market vs. Traditional Checking: Account Minimums

Both money market and traditional checking accounts require a minimum account balance. For example, U.S. Bank charges no monthly maintenance fees if you maintain a $25 monthly balance. A regular checking account at U.S. Bank also requires a $25 monthly account minimum.

Account minimums can vary from bank to bank, so check into a specific bank’s policies before you choose one. By maintaining specific account balance minimums, you’ll avoid maintenance and other fees and maximize your savings and interest.

Money Market vs. Traditional Checking: Liquidity

Money market and checking accounts are some of the most liquid options for storing your money. Most banks that issue you a debit card give you access to a certain number of ATM machines for both money market and traditional checking accounts.

Other types of investments such as certificates of deposits or CDs don’t feature this type of liquidity, as these have fixed interest rates and fixed withdrawal or maturity dates.

Be sure to check with your bank to find out what limitations are in place so you can avoid costly fees and penalties. Ask for a list or look online for a list of ATM locations so you won’t have to pay fees for using one that isn’t affiliated with your particular bank.

Money Market vs. Traditional Checking: Insurance

You should never be worried about depositing your money into a bank or credit union. As long as your checking account balance is under $250,000, it’s insured by the FDIC. Likewise, the National Credit Union Administration (NCUA) covers up to $250,000 for funds deposited into credit unions.

These regulatory agencies oversee banks to ensure your deposits are being properly handled. If a bank fails, these independent agencies will immediately step in and protect your deposits. Since FDIC insurance was introduced in 1934 in response to massive bank failures, no depositor since has lost any funds due to a bank failure.

Money Market vs. Traditional Checking: Opening an Account

If you want to open a personal money market or checking account, you’ll need:

  • Identification, such as a state ID or driver’s license
  • Social Security card
  • Minimum deposit, which varies depending on the bank

If you’re opening a business checking account, you may also need:

  • Business license
  • Legal documents
  • Minimum deposit, typically larger than for a personal account

In the case of a business checking account, it’s wise to establish one so you’ll have proof and documentation when you file income taxes and profit and loss statements.

Once you’ve provided all the necessary documentation, you’ll likely be approved, unless you have something on your credit report that demonstrates you’ve written bad checks or mismanaged a bank account in the past.

In most cases, a bank or credit union will approve your application for a checking account, though there are a few reasons you might be denied:

  • Negative information could be found on your credit report or checking account consumer report
  • History of a checking account closed due to overdrafts and/or unpaid fees
  • History of bad credit or fraud (for example, intentionally writing bad checks)
  • Too many bounced checks

If your application for a checking account is denied, you can request a copy of your credit report and check it for errors. If there are mistakes, you can contact the appropriate credit bureau or reporting agency and correct the errors.

If you feel you’ve been wrongly denied a checking account, you can submit a complaint to the CFPB.

Once your account opens, you’ll receive a few starter checks from the bank or you’ll need to order a box of checks. You can request paper and/or online bank statements each month so you can keep track of all the checks you write or payments you issue.

Get the Best Account for Your Situation

It makes good financial sense for you to research what kind of checking account offers are out there from banks. Many banks offer financial incentives from $50 to $500 if you open a new savings or checking account and maintain a specific balance. Others require you to deposit a certain amount via direct deposit.

Narrow down your list to a few banks or credit unions that are highly rated online and/or those that come recommended by family members or friends. Check out interest rates, minimum balance requirements, ATM and branch locations, maintenance fees and other pertinent information before you open a money market or traditional checking account.

Even if you only write a few checks per month, having a checking account is a good way to track your spending and document your purchases.

If you've found the type of account that's right for you, be sure to check out Benzinga's guides on the best money market accounts and the best checking account.

About Laura Hipshire

Expert-level knowledge of Medicare Advantage plans and regulatory guidelines