Can You Write Checks From a Money Market Account? (original) (raw)

Unlike certificates of deposit (CDs), which lock your funds up for a set period of time and often have early withdrawal penalties, money market accounts let you access the funds at any time. In this article, we at the MarketWatch Guides team explain the check-writing features of money market accounts and the potential limitations of these accounts.

Key Takeaways

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Check-Writing Features of Money Market Accounts

Not all money market accounts come with check-writing privileges. Before opening a new account, understand the account terms and if it allows you to write checks. You should also consider how you plan to use an account and what kind of withdrawals you want to make.

Money market accounts that do offer check writing typically offer a first set of checks for free when you open an account. You can also reorder checks through the bank or use a third-party service. Make sure that when you receive a new set of checks, the information — including your name, address, routing number and account number — is correct.

Writing a check from a money market account is identical to writing a check from a checking account. You should record the check number, amount and recipient’s name in your checkbook ledger. This makes it easier to track a check if you need to cancel it for any reason.

Check-Writing Limits for Money Market Accounts

If you’re considering a money market account with check-writing privileges, know that many accounts have transaction limits (usually six per month) that may inhibit your ability to make payments or withdrawals from the account.

The Federal Reserve (also known as the Fed) classifies money market accounts as savings deposits rather than transaction accounts like traditional checking accounts. This means money market accounts are generally limited to six “convenient” transfers or withdrawals per month as a part of the Fed’s Regulation D legislation.

According to the Fed, convenient transfers or withdrawals include preauthorized or automatic transfers (such as bill payments or overdraft protection transfers) and transactions made via check, fax or debit card. However, this limit doesn’t apply to ATM withdrawals or withdrawals made in person at a bank or by mail.

However, in April 2020, due to the financial challenges that arose during the pandemic, the Fed suspended this six-per-month rule. Banks are no longer required to have this limit. Many still enforce a limit of six convenient transactions per month, though some now offer unlimited transactions.

Look for transaction limits on any account you’re considering so you know which transactions count toward any limits.

How To Write a Check From a Money Market Account

Writing a check from a money market account is identical to writing a check from a checking account. Here’s a step-by-step guide on what to do:

  1. Write the date: Put the date on the date line at the top right hand side of the check.
  2. Write the recipient’s name: This goes on the line that says “Pay to the order of” in the middle of the check.
  3. Fill in the numeric amount of the check: This goes in the box on the right side with the “$” next to it.
  4. Write the amount in words: Fill in the amount of the check in words on the line below that ends with the word “Dollars.”
  5. Write a memo note: Write a quick note on the memo line indicating what the check is for. This is a good record keeping practice for staying organized.
  6. Sign the check: Write your full signature on the line on the bottom right. A check is not valid without your signature.

After you’re done writing the check, record the check number, the amount and the recipient’s name in your checkbook ledger. This makes it easier to track a check if you need to cancel it for any reason.

Pros and Cons of Money Market Account Checks

Here are some pros and cons about check writing with money market accounts:

Pros

Flexibility: Money market accounts often include check-writing privileges so you can access your money at any time. For someone seeking a bank account to designate toward savings goals or an emergency fund, this can be an ideal option.

Checks are often included for free: If your money market account includes check-writing capabilities, you’ll often get your first set of checks for free.

Financial management: Writing checks from your money market account can help you reach, and pay for, financial goals separately from your day-to-day spending.

Cons

Transaction limits: Although it’s no longer required to have limits on the number of written checks or other transactions, many banks still cap the number of checks you can write per month and may close your account or charge you a fee if you exceed this limit.

Temptation to overspend: A money market account is meant to be used for savings, and easy access to your funds via check or other methods may entice you to spend instead.

Requirements: Many money market accounts require a high minimum deposit to open or a high minimum balance to maintain the account. If you write a check that causes your balance to dip below the balance requirement, the bank could charge a monthly fee or close the account.

The Bottom Line: Writing Checks From a Money Market Account

A money market account with the ability to write checks offers an appealing blend of the higher interest rates associated with savings accounts and the ability to make payments via check like a checking account. For someone seeking a bank account for personal finance goals or an emergency fund, a money market account can also be an ideal option.

However, be aware of the benefits and limitations of any account you’re considering, including any restrictions on the number of checks or withdrawals you can make each month. Also be aware of any minimum opening deposit requirements or minimum balance requirements so you don’t write a check that makes your balance dip below any limits. Understanding the details can help you to make an informed decision about which account is right for you.

FAQ: Can You Write Checks From a Money Market Account?

A money market account either comes with check-writing privileges or it doesn’t. If an account offers check-writing privileges, that information should be disclosed to you up front along with the other terms and conditions of the account. Money market accounts that allow checks to be written don’t have any set-up requirements. As soon as you fund your account and receive your checks, you’re all set to write a check.

No, not all money market accounts offer check-writing privileges**.** Carefully read the terms and conditions of any money market account you’re considering to find out if you can write checks from it.

There can be fees associated with writing a check from a money market account, but it depends on the policies of the bank and the account. Some money market accounts charge a fee for each check written over an allotted monthly number of transactions. There’s also typically a fee to reorder checks, which varies by bank or third-party provider. Check the terms of any account you’re considering to understand what fees you might have if you exceed any check-writing limits.

All money market accounts from federally insured banks and credit unions are insured. Deposit accounts from traditional and online banks are insured by the Federal Deposit Insurance Corp. (FDIC), while credit unions’ deposit accounts are insured by the National Credit Union Administration (NCUA). Both FDIC insurance and NCUA insurance cover account holders up to the maximum allowable amount of $250,000 per account category, depositor and financial institution.

*Data accurate at time of publication