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Is there a penalty for withdrawing from your money market account?
Money market accounts (MMAs) usually 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. That limit applies to most (not all) types of transactions. And if you exceed it, you can face fees or even have your money transferred to a checking account that doesn't earn interest.
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 on savings accounts, including MMAs. Although the requirement was essentially eliminated in 2020, lots of banks still choose to uphold it.
If your bank has withdrawal limits, the following policies likely apply to your money market account:
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You can make up to six penalty-free withdrawals per month.
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There's no limit on ATM and in-branch withdrawals.
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After you hit the withdrawal limit, you'll face an "excessive withdrawal fee" or other penalties for each transaction.
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There may be limits on the amount of each transfer and on the amount you can transfer each day.
What is the penalty for withdrawing from your money market account too often?
The penalty for making too many withdrawals from an MMA or other savings account depends on the bank.
Again, some financial institutions don’t impose any limits on the number of withdrawals you can make per month. For those that do, if you exceed the limit, you might get a letter or notice from your bank explaining the problem and outlining potential penalties. Here's what to expect:
Fees
Many banks will charge an excessive withdrawal fee for each transaction you make after hitting the limit.
It can be difficult to pinpoint the fee on your account since banks often bury this information in the fine print. If you're shopping around for a money market account, try searching in the bank's online deposit account agreement or disclosures. 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" MMA withdrawals:
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Home State Bank: $2.50
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PNC: $3
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Regions Bank: $6
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National Bank of Arizona: $10
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Truist: $15 (includes withdrawals made at branches and ATMs)
Rejected payment
This penalty is less common, but once you pass your limit on allowable withdrawals, the bank may refuse to process your transactions. Synchrony Bank, for example, will return checks, refuse transfers, and charge a fee for each withdrawal you attempt to make after hitting your allowable limit.
Account closure
If you repeatedly exceed the withdrawal limit, the bank can close your account. When this happens, the bank usually moves your money to a basic checking account, which means your deposits will earn little to no interest.
The account closure 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 money market account penalties and fees
Incurring fees and other penalties in a money market account can significantly stunt your overall earnings. Here’s how to avoid them:
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Open an MMA at a bank that doesn't charge excess withdrawal fees.
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Set an alert or keep track of your withdrawals to avoid exceeding the limit.
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Make withdrawals at a bank branch or in-network ATM if you've exceeded your allowable withdrawals.
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For cash you need on a day-to-day basis, move it to a checking account.
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Maintain the required minimum balance (if applicable) to avoid paying a monthly maintenance fee.
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Enroll in online banking to avoid paying a paper statement fee.
Are there banks that don't charge penalties for money market account withdrawals?
Yes, there are plenty of financial institutions that allow you to make unlimited withdrawals from their MMAs. These accounts include:
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CIT Bank's Money Market Account (1.55% APY)
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City National Bank's Personal Money Market Account (0.85%-1.36% APY)
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Mountain America Credit Union Money Market Account (0.50%-4.25% APY)
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SF Fire Credit Union Money Market Account (4% APY)
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Navy Federal Credit Union's Money Market Saving Account (0%-1.50% APY)
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Sallie Mae's Money Market Account (4.20% APY)
Read more: The 10 best high-yield money market accounts available today
