What Is a Business Money Market Account?

what is a business money market account

Susan Guillory

Susan GuilloryUpdated April 17, 2023

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A business money market account (MMA) is an interest-bearing business bank account that typically earns interest at a higher rate than business savings accounts. These accounts also offer some of the features of a business checking account, such as checks or a debit card, making them a type of hybrid business account.Opening a business money market account can be a good option for small business owners looking to build an emergency back-up fund or store excess operating funds. However, these accounts come with some limitations. Here's a closer look at how business money market accounts work, their pros and cons, plus tips on how to find the right account for your business’s needs.

Defining a Money Market Account

By definition, a business money market account is a hybrid of a checking and savings account for your business. It often earns as much, or more, interest than a standard business savings account, while also offering the functionality of a checking account by offering a debit card and/or checks.

How a Money Market Account Works

Money market accounts function in a similar way to traditional business savings accounts. They pay interest on your deposits, which is typically expressed as an annual percentage yield (APY). In addition, they are federally insured up to $250,000 per depositor. However, these accounts also share some similarities to a business checking account. They usually come with checks and/or debit cards, which allows you to spend the money in the account without first transferring it to your checking account. Like other savings accounts, money market accounts generally limit the number of withdrawals you can make to six per month. While the Federal Reserve lifted the six-withdrawal limit on savings accounts in March 2020, many banks still impose this limitation and will charge you a fee if you exceed the monthly transaction limit.Business money market accounts tend to offer higher APYs than standard business savings accounts. However, they often come with higher balance requirements. If you aren’t able to meet the required balance minimum, you may not earn the advertised APY or get charged a monthly fee. Recommended: APY vs APR: What's the Difference?

Pros and Cons of a Money Market Account for Business

When it comes to a high-yield money market account for your business, there are both benefits and drawbacks to be aware of.

Money Market Account Advantages

Businesses appreciate the fact that their income can earn interest as it sits in the bank. Many money market accounts offer competitive APYs, which can help your company’s extra cash grow over time.The money you keep in a money market account is also safe. You can’t lose it (up to $250,000), even if the bank were to go belly up.And, unlike some other savings vehicles, a money market account makes it easy to spend the money in your account. You’ll typically get a debit card or checks that can be used to pay for business expenses.

Drawbacks of Money Market Accounts

If you need to make a high number of transactions from your business bank account each month, a money market account might not be for you, since you are often limited in how many transactions you can make. If that’s the case, you may be better off with a business checking account.Another potential downside to this type of savings account is that you may be required to keep a certain minimum daily balance to avoid fees or earn the best APY.Recommended: Small Business Accounting Basics

Money Market Account Rates

Business money market account rates vary from one financial institution to another, but generally they are competitive when compared with rates on traditional savings accounts. Some accounts may offer different interest rates depending on your average balance. If this is the case for accounts you are evaluating, consider how much you plan to keep in your account before opening a money market account. Some accounts will also charge fees if your balance drops below a certain minimum threshold, so you’ll want to read the policies on each account you are considering carefully. Rates vary based on financial institution, so it can be worth shopping around.

Choosing the Right Money Market Account for Your Business

Just like any financial decision, you’ll want to consider what’s important to you before choosing the best business money market account for your company. The following questions could help you determine if a money market account is the right fit for your business.How many transactions do you think you will need to make a month? If it’s over six, you may be better off opening an interest-bearing checking account. Business checking accounts function similarly to personal checking accounts, allowing account holders to easily make transactions. Keep in mind, though, that some interest-bearing checking accounts charge fees, which can eat into any interest you earn.Do you already have business or personal accounts with a bank? You may get a better APY on asmall business money market account if you already have a relationship with the bank. Some banks will offer a bonus rate for a business money market account if you already have a business checking account with the bank. How much money, on average, do you anticipate keeping in the account? This can be an important factor if you're looking at accounts that have minimum balance requirements. Even if an account is offering a high APY, it may not be the best deal if you won't be able to meet the balance requirements and, in turn, get hit with monthly fees. Do you prefer visiting a physical branch to do your banking, or are you okay with an online-only account? If you want the ability to visit an in-person location, an online-only account may not be the right fit for you. Plus, there may be other factors you want to consider, like proximity of a branch from your office and whether the bank offers other business financing products you need.Recommended: Do Business Loans Affect Personal Credit?

Opening a Business Money Market Account

Once you’ve found a bank and a money market account you like, it should be relatively easy to open your new business money market account. While each bank may have a slightly different application process, either online or in person, you will in general need to provide:

Employer Identification Number (EIN) or Social Security number (if you are a sole proprietor)
Articles of Incorporation or Articles of Organization (if your business is a corporation or LLC)
Government-issued photo identification for you and anyone else who needs to have access to the account
Check or account number to fund your money market account

Once approved, account holders will generally be given a debit card (it may be possible to add authorized users and get cards for them as well) and/or checks, as well as online access to the account.Recommended: Building Business Credit

Is a Business Money Market Account Right for You?

If you have a large amount of cash that you can leave in your account to earn interest, and you don’t need to make more than six transactions a month, a money market account could be a good option for your business.On the other hand, if you won’t be able to maintain a high balance, you may want to consider a traditional business savings account. And, if you want to make frequent transactions, you’ll likely be better off with a traditional or interest-bearing business checking account.When shopping for a business money market account, you may want to look for a bank that also offers other business products, such as small business loans and business lines of credit.Curious about what type of financing your business might qualify for? Lantern by SoFi can help. With our online debt financing marketplace, you can search for small business loan options without scouring the web and checking multiple sites. With one short application, you’ll be matched with a loan offer that meets your company’s needs and qualifications.Let Lantern help you find the right financing solution for your small business.

Frequently Asked Questions

What is the definition of a money market account?

What are some of the advantages and limitations to a business money market account?

How do you set up a business money market account?

Can a business open a money market account?

Can you lose your money in a money market account?

What is the typical minimum balance for a money market account?

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About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.

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