A money market account is a kind of savings account that may also include the ability to write checks and use a debit card. The accounts normally impose a monthly cap of six transactions apiece, including both purchases and transfers. Withdrawals from ATMs are often not subject to any limits.
In the past, money market accounts traditionally gave interest rates often greater than standard savings accounts. However, the rates are about the same now. However, the minimum deposit or balance criteria in many MMAs are far greater than those for traditional savings accounts.
The Federal Deposit Insurance Corp. and the National Credit Union Administration provide deposit insurance for customers of banks and credit unions. If the financial institution goes out of business, your money is insured up to a maximum of $250,000 per depositor.
Are money market accounts safe?
If your money market account is held with a bank or credit union that is federally insured, then your money is secure. Make sure that your bank or credit union is a member of NCUA or FDIC. These organizations will protect your deposits up to a maximum of two hundred fifty thousand dollars per depositor, each insured bank, and per account type. This ensures that your savings are safe, up to the specified amount, if your bank goes bankrupt.
What distinguishes a money market account from other types of accounts?
Money market accounts are a hybrid form of banking that sit between checking and savings accounts. Because they pay interest, they might help your money grow over time. The ability to write checks and a debit card that allows for convenient access to cash are occasionally included in the package.
In most cases, the number of withdrawals or transfers that may be made from a money market account within a single statement cycle is capped at six. If you go over the limit, you will probably be charged a fee for each transaction above the limit (withdrawals from ATMs are not counted toward the limit). Your bank can convert your money market account (MMA) into a checking account instead, which does not accrue interest.
Is a money market fund equivalent to a money market account or vice versa?
Be aware that there is another financial instrument with a similar name to a money market account that is fundamentally different from a money market account when you evaluate the many possibilities for MMAs. It is more often referred to as a "money market mutual fund," while its formal name is a "money market fund."
Banks, brokerage houses, and investment fund businesses all provide money market funds for their customers to invest in. They are a specific kind of mutual fund that invests in short-term securities like U.S. Treasury bills and similar investments. And even though they are regarded as an investment with a low level of risk, the federal government does not cover them.
Who should look into opening a money market account?
Anyone who wishes to make more money without exposing themselves to unnecessary danger may consider opening a money market account. It might be handy to divide your savings into two accounts, with the money market account housing cash, for which you might require more regular access. If you want to do this, splitting your savings into separate accounts could be advantageous. Consider opening a money market account if you have a sizable sum of cash-generating very little to no interest. It is also a wonderful location to put money aside for unexpected expenses.
When should one go for a money market account rather than a savings account?
Suppose your bank's ordinary savings account provides a higher interest rate or the same rate as its money market account, and you aim to park your cash and watch your bank balance increase. In that case, continuing with the savings account may be worthwhile rather than switching to the money market account. If the interest rate offered by the money market is greater than the rate offered by the savings account, or if you need to make an occasional purchase from the account, and if you can satisfy any minimum balance requirement, opening a money market account could be a smart decision for you.
How to get the most out of your money market account?
Most of the time, internet banks provide the most competitive rates for money market accounts. Internet banks can often afford to provide a higher interest because they do not have to spend to maintain large branch networks. Credit unions are another place where you may obtain cheap interest rates. When finding out where you can earn the most interest, examining the various minimum balance requirements and comparing the various money market rates is important.
Bottom line
A money market account is a highly secure financial tool that may assist you in saving money more quickly. These accounts are an excellent way to see your money grow if you already have a significant amount of cash and still want access.
