A money market account almost always pays interest once a month. The bank calculates what you’ve earned every day behind the scenes, then adds up those daily amounts and credits the total to your balance on a single day each statement cycle. No federal rule sets that frequency, and a bank is free to compound and credit interest annually, quarterly, monthly, or daily, but monthly is what nearly every institution has settled on.1Consumer Financial Protection Bureau. 12 CFR Part 1030 (Regulation DD) – 1030.7 Payment of Interest
Daily Accrual, Monthly Credit
Federal rules require the bank 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: closing balance times the annual rate, divided by 365 (or 366 in a leap year).
On a $10,000 balance earning 4.50%, that’s about $1.23 a day. You won’t see that $1.23 in your account. It sits in an internal accrual bucket and doesn’t compound, because it hasn’t actually been paid yet. Compounding starts the moment the bank posts the monthly total to your balance. That posting is what turns paper earnings into real money you can spend or withdraw.
When the Monthly Credit Posts
The exact day interest hits your account tracks your statement cycle, not the calendar. Banks stagger these cycles across their customer base, so your crediting date might land on the 15th while someone else’s falls on the 30th. When the scheduled date hits a weekend or federal holiday, the deposit typically rolls to the next business day.
Electronic banking systems may show interest as “pending” for a day or two before the funds are fully available. That matters if you’re trying to withdraw or transfer the exact credited amount right away. Pull up a few months of statements and you’ll see the pattern: interest lands on roughly the same day each cycle, adjusted for weekends.
Why the Crediting Date Matters if You Close the Account
Because interest is only “paid” on the monthly crediting date, timing matters when you close an account or move your money out. Banks are not required to pay accrued but uncredited interest when you close before the next crediting date. Regulation DD permits a bank to forfeit that accrued interest, as long as the forfeiture policy was disclosed when you opened the account.1Consumer Financial Protection Bureau. 12 CFR Part 1030 (Regulation DD) – 1030.7 Payment of Interest The CFPB confirms this directly: if you close before the crediting date, “generally the bank or credit union won’t pay that interest.”2Consumer 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 do pay prorated interest through the closure date, but that’s a business decision, not a legal requirement. The bank can also define what counts as “closing.” Withdrawing your entire balance before the crediting date may trigger forfeiture even if you never formally requested closure.3eCFR. 12 CFR Part 1030 – Truth in Savings (Regulation DD)
The practical move: check your account agreement for the forfeiture policy, and when possible, time a closure or major withdrawal just after a crediting date rather than just before one. On a large balance, giving up two or three weeks of accrued interest is real money.
What the Rate Is When It Gets Paid
The APY posted on the bank’s website is not necessarily what shows up in your monthly credit. Two things move it.
First, tiered rates. Many money market accounts pay different rates at different balance levels. An account might pay 3.00% on balances under $10,000 and 4.25% on balances above $100,000. The headline number is often the top tier, not the one most customers land in.
Second, variable rates. Most money market accounts pay a variable rate, meaning the bank can raise or lower it at any time. Under Regulation DD, if the bank hasn’t committed to at least 30 days’ written notice before cutting your rate, the account is classified as variable and the bank owes you no advance warning.3eCFR. 12 CFR Part 1030 – Truth in Savings (Regulation DD) Your rate could drop and the first you’d hear about it is when the next monthly credit looks smaller than the last. Promotional rates especially tend to fall away after the introductory period.
Minimum balance requirements can also change what you actually receive. Banks must disclose the minimum needed to open the account, avoid fees, and earn the stated yield.4eCFR. 12 CFR 1030.4 – Account Disclosures A monthly maintenance fee of $10 to $20 for dipping below the threshold can erase a month’s interest on a modest balance.
Money Market Funds Follow a Similar Schedule
If your “money market” is actually a money market fund held at a brokerage rather than a deposit account at a bank, the frequency is similar but the mechanics differ. Money market funds are mutual funds that invest in short-term debt like Treasury bills and commercial paper, and they distribute earnings monthly as dividends rather than interest.5Investor.gov. Money Market Fund Those dividends reflect the actual performance of the fund’s holdings, minus the fund’s expense ratio, which is deducted before distribution.
Fund dividends are reported on Form 1099-DIV rather than the 1099-INT a bank sends.6Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID And the balance isn’t FDIC-insured; SIPC protects the shares as securities if the brokerage fails, but not against a decline in the fund’s value.7SIPC. What SIPC Protects
When the Interest Becomes Taxable
Interest is taxable in the year it’s credited to your account, not the year you withdraw it. This is the constructive receipt rule: once the bank makes the money available to you, the IRS treats it as income for that year.8eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income Interest credited on December 31 counts for that tax year. Interest accrued through December but not credited until January counts for the following year.
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 tax on the interest whether or not the form arrives. For a money market fund, the same logic applies to dividends on the 1099-DIV, including dividends that are automatically reinvested into additional shares.