Work out what a money market account pays: interest month by month, the ending balance, the effective APY, and what you keep after tax.
Money market interest is ordinary income. Add your marginal rate to see what you keep.
Estimates only. Money market rates are variable and can change at any time, tiered rates and monthly fees are set by each bank. Confirm the terms on the account disclosure.
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Money market accounts quote an APY, pay a variable rate, and usually credit interest monthly — so the number you were quoted and the number that lands in your account are not the same thing. This calculator shows both: what the first month pays, what the balance reaches at the end of your term, and what a quarter-point more or less would be worth. It works in months, so a 9-month hold is as easy to price as a full year.
Three numbers do the work: your balance, the annual rate, and how often the bank compounds. Divide the annual rate by the number of compounding periods in a year to get the periodic rate, then apply it once per period. Most US banks compound daily and credit the total once a month, so a month of daily compounding at rate r is (1 + r/365)^30.42 − 1 in practice. On $10,000 at 4.50% compounded daily, one month adds about $37.60 and one full year adds $460.25 — more than the $450 the headline rate implies, because the interest itself starts earning.
Money market interest formula
Cash that has to stay reachable. A money market account keeps check-writing or debit access while paying close to a savings rate.
A down payment, a tax bill, a tuition payment. You know the month you need it, so you can price the exact term instead of guessing.
Two accounts quoting the same rate can pay different amounts if one compounds daily and the other monthly. Run both and compare the ending balance.
A money market keeps the money liquid at a variable rate; a CD fixes the rate but charges to break it. Price the money market here, then the CD, and compare.
Your statement shows one month of interest. The month-1 figure here tells you what that number should be on your opening balance.
Unlike a CD, a money market rate can change at any time. The figure here prices the rate you enter for the whole term, which is the right way to compare offers but not a promise the bank will hold it.
Money market interest is ordinary income in the year it is paid, not when you withdraw. At a 24% marginal rate, a 4.25% APY nets closer to 3.23% — enter your rate to see the actual figure.
Many accounts pay the headline rate only above a balance threshold, and a monthly maintenance fee can outrun the interest on a small balance. Check both before comparing APYs.
On $25,000 over three years, moving from 4.00% to 4.25% is worth about $200. The rate ladder above prices that gap on your own numbers rather than in the abstract.
At 4.50% APY compounded daily, $10,000 earns about $37.60 in the first month and $460.25 over a full year. At 3.75% it is about $31.30 a month and $382 a year. The monthly figure is the one that matches your statement; the annual figure is higher than rate × balance because the interest compounds.
The bank divides the annual rate by the number of compounding periods in a year, applies that periodic rate to the balance each period, and credits the accumulated total — usually once a month. With daily compounding at 4.50%, each day adds 0.0450 ÷ 365 = 0.0123% to the balance, and a month of that comes to roughly 0.3757%. Multiply by your balance for the month's interest.
Take your balance, multiply by the annual rate, and divide by twelve for a close estimate — $25,000 at 3.81% is about $79 a month. Compounding makes the true figure slightly higher, and this calculator gives the exact number as "Interest in Month 1". Later months pay a little more, because the balance has grown.
A money market ACCOUNT is a bank deposit, FDIC-insured to $250,000, paying a rate the bank sets. A money market FUND is a mutual fund holding short-term debt — not FDIC-insured, priced by its 7-day yield, and it can in principle lose value. This calculator models the account. A fund's 7-day yield is already annualised, so you can enter it here for a rough comparison, but the insurance and the risk are not the same.
Yes. It is ordinary income, reported on a 1099-INT, and taxed in the year the bank credits it rather than the year you withdraw. State tax follows the same rule as other bank interest. Enter your marginal rate above to see the after-tax figure.
Most US banks compound daily and credit monthly, but not all — some compound monthly, and a few quarterly. It matters less than people expect: on $10,000 at 4.50% for a year, daily compounding beats monthly by about $1.00. The rate itself is worth far more than the compounding method, which is why the APY is the number to compare.
They are close cousins and the rates overlap. A money market account more often comes with check-writing or a debit card; a high-yield savings account more often has no minimum. Compare the APYs and the balance tiers rather than the product names — and check whether the top rate requires a balance you will actually keep.
The balance cannot fall from market movement, and deposits at an FDIC member bank are insured to $250,000 per depositor, per bank, per ownership category. It can still lose ground two ways: a monthly maintenance fee larger than the interest earned, and inflation running above your rate, which lowers what the money buys.