A money market account almost always pays interest once a month. Your bank calculates what you’ve earned every single day, but it only moves that money into your spendable balance on one scheduled date each statement cycle. So the honest answer to how often a money market account pays interest is: daily accrual, monthly payout, at nearly every bank and credit union in the country.
That gap between “earning” and “getting paid” is where the useful details live. It changes what you actually take home, when you owe taxes on it, and what happens if you close the account at the wrong moment.
How Daily Accrual Works
Your bank doesn’t wait until month-end to figure out what you’ve earned. Federal rules require institutions to calculate interest on the full principal in your account every day, using either the daily balance method or the average daily balance method.1Consumer Financial Protection Bureau. 12 CFR Part 1030 (Regulation DD) – 1030.7 Payment of Interest Most banks use the daily balance approach: they take your closing balance, multiply it by the annual interest rate, and divide by 365 (or 366 in a leap year).
On a $10,000 balance earning 4.50%, that comes to about $1.23 a day. You won’t see that $1.23 anywhere in your account. It sits in an internal accrual bucket, adding up quietly. Because it hasn’t been credited yet, it isn’t earning interest of its own, and you can’t spend it or withdraw it. It only becomes real money on the day the bank posts it.
When the Interest Actually Posts
The crediting event for most money market accounts happens once a month. The bank totals your daily accruals and deposits them as a single line item in your account. There’s no federal rule requiring monthly crediting specifically. Banks can compound and credit interest annually, quarterly, monthly, daily, or on any other schedule.1Consumer Financial Protection Bureau. 12 CFR Part 1030 (Regulation DD) – 1030.7 Payment of Interest Monthly is simply what almost every institution has settled on.
The exact day depends on your statement cycle, not the calendar. Banks stagger these cycles to spread out their processing, so your interest might post on the 15th while your neighbor’s posts on the 30th. When the scheduled date falls on a weekend or federal holiday, the deposit usually rolls to the next business day. You may also see interest show up as “pending” for a day or two before the funds are fully available, which matters if you’re trying to move that exact amount right away.
APY vs. Interest Rate
Because the bank credits interest monthly, once it hits your account, it starts earning interest of its own the next day. That’s compounding, and it’s the reason the annual percentage yield (APY) a bank advertises is slightly higher than the raw interest rate. Two accounts could quote the same rate and produce different APYs if one compounds daily and the other monthly.
Regulation DD requires banks to disclose both the interest rate and the APY, and to explain how they calculate your balance for interest purposes.2eCFR. 12 CFR 1030.4 – Account Disclosures When you’re comparing accounts, the APY is the apples-to-apples number, because it already accounts for how often compounding happens.
What You Lose If You Close Before the Crediting Date
Here’s the part of monthly crediting that catches people out. If you close the account between crediting dates, the bank isn’t required to hand you the interest that’s been accruing all month. Under Regulation DD, a bank may forfeit your accrued but uncredited interest, as long as it disclosed that policy when you opened the account.1Consumer Financial Protection Bureau. 12 CFR Part 1030 (Regulation DD) – 1030.7 Payment of Interest The CFPB puts it plainly: if you close before the crediting date, “generally the bank or credit union won’t pay that interest.”3Consumer Financial Protection Bureau. I Closed My Interest-Bearing Account, But the Bank Did Not Pay Me Interest Up Until the Day I Withdrew the Money. Why?
Some banks pay prorated interest through the closure date anyway, but that’s a business decision, not a legal requirement. The bank also gets to define what counts as closing. Withdrawing your entire balance before the crediting date can trigger forfeiture even if you never formally closed the account.4eCFR. 12 CFR Part 1030 – Truth in Savings (Regulation DD)
The practical move: if you’re planning to close, check the account agreement for the forfeiture policy, and time the closure for just after a crediting date rather than just before one. On a large balance, two or three weeks of accrued interest is real money.
Money Market Funds Pay Dividends, Not Interest
If your “money market” is at a brokerage rather than a bank, the payout mechanics look similar but the label is different. Money market funds are mutual funds that invest in short-term debt, and they distribute monthly dividends that reflect the fund’s actual performance.5Investor.gov. Money Market Fund The frequency is monthly, like a bank account, but there’s no fixed rate. What you receive depends on what the fund’s holdings earned, minus the expense ratio the fund charges to cover operating costs.
Two other things to know if you’re holding a fund rather than a deposit account: money market funds are not FDIC-insured, and their distributions are reported on Form 1099-DIV rather than 1099-INT at tax time.6Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID
When Interest Becomes Taxable
The crediting date does more than move money into your spendable balance. It also fixes the tax year the interest belongs to. Interest is taxable as ordinary income in the year it’s credited to you, even if you never withdraw it. That’s the constructive receipt rule: once the bank makes the money available, the IRS treats it as income for that year.7eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income Interest credited on December 31 counts for that year, not the following one.
Your bank will issue a Form 1099-INT if you earned $10 or more in interest during the year.6Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID You owe the tax whether or not you get the form. So the same monthly crediting event that puts money in your pocket also decides which tax year it lands in, which occasionally matters for anyone watching a bracket at year-end.