What is a business money market account?

A business money market account, or business MMA, works similarly to a regular money market account, but it is tailored specifically for businesses rather than individuals — essentially a money market account for businesses. 

A business MMA is a type of interest-bearing deposit account that allows businesses to earn interest on surplus funds while still maintaining some liquidity. It is often seen as a hybrid between a checking and a savings account, and tends to offer higher interest than normal business savings accounts, alongside flexible access to your funds through potential check-writing and debit card usage.

A business MMA typically earns higher interest than a traditional savings account. However, unlike a checking account, it may limit the number of transactions you can make each month.

Business money market accounts tend to offer higher interest rates than standard business savings accounts, allowing your money to grow faster over time. Some business MMAs can also offer a tiered annual percentage yield (APY) based on your account balance, meaning the higher your balance is, the better your APY will be. This can be more attractive to businesses looking to boost their savings.

However, not all institutions offer tiered rates, so you may want to double-check beforehand. Some accounts may also offer promotional rates but may come with strict conditions (e.g., a higher initial deposit or minimum balance).

Not all business MMAs offer the same interest rate, so you might want to compare banks and account types to see which rates can benefit your business the most.

While business money market accounts offer more liquidity than traditional business savings accounts, they still come with limitations. Many banks limit transfers and withdrawals to six per month, resulting in fees for any extra transactions. If your account comes with debit card access, the monthly limit can also apply to your debit transactions.

Therefore, while your funds may be more accessible through a business MMA, withdrawal limits, like in traditional business savings accounts, can still apply.

Many banks and other financial institutions require businesses to maintain a minimum daily balance, and failing to do so can trigger monthly maintenance fees. Aside from daily balances, some MMAs also require a minimum deposit, which can vary by institution. However, fulfilling the daily minimum balance and growing your savings can also lead to better interest rates, which can further contribute to the growth of your business’s savings.

When it comes to tax and reporting considerations for a business MMA, here are some important points to keep in mind:

• Interest is taxable as business income: The interest earned on your account is considered taxable income by the IRS and must be reported the year it’s earned.

• Reporting considerations: The way you report interest earned depends on your business’s legal structure (e.g., sole proprietorships, partnerships or multi-member LLCs, or corporations). You might want to seek financial advice from a financial advisor or accountant to ensure you are accurately reporting your earnings.

Although a business MMA can be a great way to start saving for your business, you might want to consider the potential advantages and disadvantages of this account type to ensure it aligns with your goals and needs.

Here are some of the pros and cons of saving with a business MMA:

• Higher interest rates: Thanks to better interest rates, business MMAs can help you benefit from higher returns than basic savings or checking accounts.

• Liquidity: Business MMAs give you access to your money within the account’s transaction limits, giving you more liquidity (and potentially limited check-writing or debit access).

• Low risk: If your business uses an FDIC-insured bank or NCUA-insured credit union, the business funds are protected up to the $250,000 limit, providing extra security.

• Tiered rates may favor high balances: While tiered rates may be a benefit for accounts with higher balances, smaller accounts will lose out on potential growth.

• Balance requirements may be high: Business MMAs often require a minimum balance to avoid fees and benefit from higher interest rates, but falling below this threshold can lead to maintenance fees and lower interest.

• Withdrawal limits: Many banks restrict the number of withdrawals you can make on a monthly basis (e.g., six per month), which may be restrictive for businesses that need frequent access to their funds.

When choosing an account, the best business MMA will be the one that most closely aligns with your business’s financial goals and needs.

You might want to consider the following factors:

Account rates can vary, so you may want to look for institutions offering top business money market rates to help boost your saving potential. You can also consider accounts offering a tiered structure or promotional offers, which can help further increase your savings.

While some business MMAs offer check-writing or debit card access, it is not a requirement for all accounts. Therefore, you may want to evaluate your liquidity needs to determine if these features are essential for you or if you can still benefit from a business MMA that does not offer debit card or check-writing access.

You might also consider your business’s monthly usage patterns, since transactions may be limited. If you need to make frequent transactions, a savings account might not be the most optimal choice.

Business MMAs often have higher balance requirements, so you might want to identify accounts with no fees or reasonable waivers. If you need more flexibility, you might consider seeking accounts with low or no minimum balances or consider savings options with lower requirements.

When determining your goals and needs, you might also want to consider if you require additional features such as online or mobile banking, ATM access, or even the ability to link to business checking. These features may vary by financial institution, so it is important to do some extra research as well.

A business money market account is a good option for businesses looking to earn higher interest on their savings while still maintaining some liquidity of their funds. While tiered rates may be more of an advantage to those with higher balances, account conditions may vary, meaning smaller businesses can still benefit from competitive interest rates compared to traditional savings. However, you may still want to consider liquidity needs, as monthly transactions may be limited.

Understanding how business money market accounts and other savings products work helps build financial confidence. Being aware of different options can help you better understand which account best fits your needs and allows you to work towards reaching your savings goals. While Raisin does not offer accounts for businesses, if you are ready to get started building your personal savings, the Raisin marketplace is here to help. Raisin gives you access to a variety of money market accounts and other savings products with competitive interest rates to maximize your savings potential. Compare rates and start saving today!

Rates vary by institution and market conditions, but business MMAs typically offer higher interest than standard business accounts. Some offer tiered APYs, where higher balances can earn even better rates.

No. Most business MMAs limit certain transactions (e.g., withdrawals or transfers) to around six per month, with fees applied for exceeding the limit.

Often yes. Many business MMAs use a tiered APY structure, meaning higher balances may earn better rates. However, not all accounts have a tiered structure and some offer flat rates regardless of balance.

A business MMA is insured if held at an FDIC-insured bank (or NCUA-insured credit union), meaning deposits are insured up to $250,000 per depositor, per institution.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.