The Definition of a Money Management Account

A money management account rolls checking and savings into one account. Such accounts are primarily offered by credit unions and usually have a minimum balance, limit the number of withdrawals and sometimes limit how much you can withdraw at one time. They earn interest at a higher rate than a general savings or checking account. They’re designed not to be used as everyday checking accounts, but as accounts in which you’re saving money either for big purchases or future investing.

Minimum Balance

Money management accounts have a minimum balance that you must maintain if you want to earn a higher interest rate. Generally they require around $2,500 as a minimum balance, but some organizations require only $1,000. The minimum balance is generally the minimum amount necessary to earn dividends at the promised interest rate. An account with a lower balance will not receive the promised interest rate and may not earn interest at all. In some cases, an account with less than minimum balance will incur fees.

Higher Interest Rate

Money management accounts offer a higher rate of return than a traditional savings or checking account, but the rate will vary between institutions. Compare interest rates and other features of money management accounts at a number of institutions before committing to one.

Withdrawal Conditions

Conditions are often placed on withdrawals. These change from place to place, but some examples include a minimum amount on withdrawals, a limit on how many withdrawals you can make, or a limit on the number of checks you can write in a given period of time. Some institutions won’t allow smaller withdrawals while others put a cap on transactions, allowing only 3 or 6 per month, for example.

Money Management Account Uses

Money management accounts are not traditional savings accounts, nor are they traditional checking accounts. Although they often offer features of both they are not a replacement for either, but rather a supplemental account. They are designed for long-term savings, which means that the money in them is not often accessed, or is accessed mostly for large purchases. For instance, if you were saving toward buying a house, the money in your money management account could sit for a couple of years, earning you a higher rate of interest. There aren’t many occasions for which you would access the money. With the checking option of a money management account, you could pay an occasional bill from that account.