Is there a penalty for withdrawing from your money market account?

Money market accounts (MMAs) typically pay more interest than traditional savings accounts. But like many high-yield bank accounts, there are often restrictions on when and how you can access your cash.

Some banks limit you to six free withdrawals from an MMA per month. This limit applies to most (but not all) transaction types. And if you exceed it, you can deal with fees or even transfer your money to an interest-free checking account.

Do money market accounts have withdrawal limits?

Many money market accounts have withdrawal limits. Why? In the past, Regulation D required banks to limit customers to six “convenient transfers” per month from savings accounts, including MMAs. Although the requirement was essentially eliminated in 2020, many banks still choose to keep it.

If your bank has withdrawal limits, the following policies likely apply to your money market account:

• You can make up to six penalty-free withdrawals per month.

• There is no limit on ATMs and branch withdrawals.

• After reaching the withdrawal limit, you will face an “excessive withdrawal fee” or other penalties for each transaction.

• There may be limits on the amount of each transfer and the amount you can transfer each day.

What is the penalty for withdrawing too often from your money market account?

The penalty for making too many withdrawals from an MMA or other savings account depends on the bank.

Again, some financial institutions place no limit on the number of withdrawals you can make per month. For those who do, if you go over the limit, you may receive a letter or notice from your bank explaining the problem and detailing potential penalties. Here’s what to expect:

Rates

Many banks will charge an excessive withdrawal fee for each transaction you make after you reach your limit.

It can be difficult to determine the rate on your account, as banks often bury this information in the fine print. If you are looking for a money market account, try searching the bank’s online deposit account agreement or communications. If you already have a money market account and can’t find the information, ask your bank for the fee schedule.

Here’s what the following financial institutions charge for each “excessive” withdrawal from MMA:

Rejected payment

This penalty is less common, but once you exceed your permitted withdrawal limit, the bank may refuse to process your transactions. Synchrony Bank, for example, will bounce checks, decline transfers, and charge a fee for each withdrawal you attempt to make after you’ve reached your allowable limit.

Account closure

If you repeatedly exceed the withdrawal limit, the bank may close your account. When this happens, the bank usually moves your money into a basic checking account, meaning your deposits will earn little or no interest.

Account closures could also be reported to ChexSystems or Early Warning Systems (EWS), two agencies that create reports on your banking history. As a result, you may have trouble opening a new bank account in the future.

How to avoid penalties and fees on your money market account

Incurring fees and other penalties in a money market account can significantly reduce your overall earnings. Here’s how to avoid them:

• Open an MMA at a bank that doesn’t charge excessive withdrawal fees.

• Set an alert or track your withdrawals to avoid going over the limit.

• Make withdrawals at a bank branch or network ATM if you have exceeded your permitted withdrawals.

• For the cash you need every day, move it to a checking account.

• Maintain the required minimum balance (if applicable) to avoid paying a monthly maintenance fee.

• Sign up for online banking to avoid paying a paper statement fee.

Are there banks that do not charge penalties for withdrawing from money market accounts?

Yes, there are many financial institutions that allow you to make unlimited withdrawals from their MMAs. These accounts include:

• CIT Bank Money Market Account (1.55% APY)

• City National Bank Personal Money Market Account (0.85%-1.36% APY)

• Mountain America Credit Union Money Market Account (0.50%-4.25% APY)

• SF Fire Credit Union Money Market Account (4% APY)

• Navy Federal Credit Union Money Market Savings Account (0%-1.50% APY)

• Sallie Mae Money Market Account (4.20% APY)

Read more: The 10 Best High Yield Money Market Accounts Available Today