What is the downside to a money market account?

Here are a few downsides to consider when opening a money market account: Fees and penalties can reduce your earnings. If the interest rate is low and the fees are high, you could lose some money. Money market accounts do not have the potential to earn as much as investing in stocks or bonds. The fees for money market accounts may be higher than other savings accounts. These accounts usually require you to maintain a minimum account balance. There may be limits to how many transactions you can make per month.

Should I worry about my money market account?

No, these accounts are safe and provided by most financial institutions, major banks or credit unions. These accounts are also insured by the FDIC or NCUA and protected up to $250,000 per account. Be advised, however, that the interest rate or money market rate you receive on your account balance may not be able to keep up with certain penalty fees or monthly fees you incur. This could result in the value of your account dipping beneath the initial deposit.

Should I keep all my money in a money market account?

Money market accounts are a safe place to keep your money but with any kind of savings, you should consider diversification. Consider your long-term and short-term goals and make sure you are saving accordingly.

Advertiser Disclosure

Can Money Be Lost in a Money Market Account?

October 13, 2023

5 min Read

Written by Caitlyn Moorhead

Edited by Elizabeth Constantineau

Young woman doing home finances at home in the morning stock photo

hobo_018 / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Keeping your money safe not only goes a long way for peace of mind but also for your future financial situation. No matter if the bank account is a traditional savings account, high-yield savings account or a certificate of deposit, accounts and money go hand in hand with growing and preserving your wealth. But can money be lost in a money market account? Keep reading to find out.

Money Market Account: Quick Take

A money market account is a deposit account offered by banks or credit unions that typically pays a higher interest rate than a standard savings account. These accounts are like a combination of checking and savings accounts. However, they are more designed for savings goals and there might be a minimum amount required for deposits.

Be aware though that your access to this account may be limited. Depending on your bank, you could have a limit on the number of transactions you can make by debit card, electric transfer or physical check writing privileges. These accounts are also not to be confused with money market mutual funds which are considered a different type of investment.

Can Money Be Lost in a Money Market Account?

No, your money will not be lost if you are banking with an FDIC-insured financial institution. These accounts will be protected up to $250,000 per account, per depositor.

However, the interest rate or money market rate you receive on your account balance may not be able to keep up with certain penalty fees or monthly fees you have incurred. If this is the case, the value of your account could dip beneath the initial deposit and you would, in theory, lose money.

How Safe Is Your Money in a Money Market Account?

Your money is very safe in this interest-bearing account. These accounts are either FDIC-insured or covered by the National Credit Union Administration. This means that your funds are insured up to $250,000 so you cannot directly lose the money you have deposited into your account.

Your money is just as safe in a money market account as it would be in other products your bank or credit union offer such as checking accounts or high-yield savings accounts.

Drawbacks of a Money Market Account

Though you will not directly lose your funds from a money market account, here are some possible downsides of this type of deposit account:

Fees and penalties can reduce your earnings. Though the money won’t go missing, if the interest rate is low and the fees are high, you could lose some money.
Money market accounts do not have the potential to earn as much as investing in stocks or bonds.
The fees for money market accounts may be higher than other savings accounts or products.
These accounts usually require you to maintain a minimum account balance and there are limits to how many transactions you can make per month.

Should You Keep All of Your Money in a Money Market Account?

When it comes to savings, you should always diversify a bit depending on what your savings goals are and what you are working toward.

Money market accounts are a safe way to deposit money and earn more interest than an average savings account.

These are great for short-term savings goals, but other savings accounts or products should be considered for longer-term goals such as retirement.

Final Take To GO

The bottom line is money cannot be directly lost from a money market account from any bank, credit union, online bank or financial institution. These accounts are insured by the FDIC and protected up to $250,000 per account. However, the interest rate or money market rate you receive on your account balance may not be able to keep up with certain penalty fees or monthly fees you have incurred. This can result in the value of your account dipping beneath the initial deposit.

FAQ

Here are the answers to some of the most frequently asked questions regarding money market accounts.

What is the downside to a money market account?
- Here are a few downsides to consider when opening a money market account:
  - Fees and penalties can reduce your earnings. If the interest rate is low and the fees are high, you could lose some money.
  - Money market accounts do not have the potential to earn as much as investing in stocks or bonds.
  - The fees for money market accounts may be higher than other savings accounts.
  - These accounts usually require you to maintain a minimum account balance.
  - There may be limits to how many transactions you can make per month.
Should I worry about my money market account?
- No, these accounts are safe and provided by most financial institutions, major banks or credit unions. These accounts are also insured by the FDIC or NCUA and protected up to $250,000 per account.
- Be advised, however, that the interest rate or money market rate you receive on your account balance may not be able to keep up with certain penalty fees or monthly fees you incur. This could result in the value of your account dipping beneath the initial deposit.
Should I keep all my money in a money market account?
- Money market accounts are a safe place to keep your money but with any kind of savings, you should consider diversification. Consider your long-term and short-term goals and make sure you are saving accordingly.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.