![]() As stated above, you need to pay a fee if your balance dips below the minimum requirement. This often means $5,000, but can be up to $10,000 at some banks. It’s usually much higher than regular savings accounts. Banks often require a minimum deposit to open the account, then a minimum balance to keep in the account. For one, some people can’t afford a money market account. While they have a great combination of benefits, they also have some downsides to offset their higher returns. Of course, money market accounts aren’t perfect. ![]() Some accounts could be insured for even higher amounts if they’re linked to property investments. That means your principal balance is covered against loss if something goes wrong with your bank, credit union or financial institution. Money market accounts from a bank are backed by the Federal Deposit Insurance Company (FDIC) for up to $250,000 per account and those from credit unions are backed by the National Credit Union Administration (NCUA). Money market accounts are also extremely safe. There are typically no fees for writing checks and no penalties for large withdrawals as there can be with other high-yield accounts. Some also allow you to link a debit card to your account. Most MMAs allow you to make up to six transactions or write up to three checks a month. ![]() Think between 1% to 2%, depending on the institution.Īnother big advantage of money market accounts is liquidity and flexibility. You stand to earn more with a money market account. Many savings accounts earn as little as 0.1% interest. The main reason people stash their funds this way is because money market accounts can yield higher interest than both a checking account or a simple savings account. There are many benefits for keeping your savings in a money market account. ![]() Some banks, however, will make your interest payments quarterly. Interest is compounded either daily or monthly and interest is usually paid out monthly. Since rates are often tiered, they become a more attractive tool, the more money you put into them. Since they provide this added value for banks (and they usually have higher minimum balance requirements), banks are willing to pay higher yields on money market accounts. If you make more withdrawals than allowed or don’t maintain your required minimum balance, banks will often charge a fee.īeyond providing funds for bank loans like a regular savings account, your money market funds can also be used in low-risk investments like CDs and bonds. Money market accounts often come with required minimum balances. As noted earlier, this limit does not include ATM withdrawals or withdrawals you make in person. You can deposit and withdraw funds into a money market account as you see fit, but you’re usually limited to six transfers per month in accordance with Regulation D. Money market accounts work similarly to a savings account. It’s important to note that a money market account is not a money market mutual fund, which is an investment that could increase or decrease in value based on market behavior. While they work very similarly to savings accounts on the consumer side, banks can use your MMA funds differently. Money market accounts were originally developed so banks could compete with high-yield yet liquid financial products that Wall Street was launching, like certificates of deposit. Check out how the features stack up with other account types below: Bank Account Comparison Some bankers compare it to a high-yield savings account, but it’s really much more. Money market accounts essentially offer a combination of features from typical savings and checking accounts. If you go over that limit, your bank can close the account, levy fees or convert the account to a checking account. However, you are limited to only six transactions a month by federal regulation (these don’t include ATM withdrawals). Like a checking account, you can write checks, make online bill payments and withdraw funds with an ATM card. Money market accounts come with other perks too, though. In fact, most money market accounts offer higher interest rates than standard savings accounts. This type of account accrues interest on funds you deposit, just like a savings account. Put simply, a money market account (MMA), also called a money market deposit account, is a type of savings account offered by banks, credit unions and other financial institutions.
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