An MMDA works a very much like a traditional savings account for the consumer. While there are more restrictions on an MMDA than on a checking account, they are much less of an obstacle in an emergency than the restrictions on CDs and Treasury bonds. For example, most MMDAs allow for a certain number of withdrawals per month, and allow checks to be written against the balance; the number of checks is also limited. There are not restrictions on the amount that may be withdrawn, so long as the minimum balance isn’t compromised.

The minimum balance for MMDAs is, however, usually higher than the minimum balance set for traditional savings accounts. This is to give the bank or credit union a greater amount of discretion in lending or investing the funds.

The payoff for maintaining this higher balance, compared to the interest from a savings account, can be significant. MMDAs pay higher interest rates than most savings accounts, and are also FDIC insured.