14 Things to Know About Money Market Accounts
Written by: Kristy Welsh
Last Updated: August 18, 2017
If you want more than a typical savings account can offer, but don’t want to tie your money up in a CD, a money market account could be the answer. Just be sure to do your homework first, as all money market accounts are not created equal, and certain terms and conditions do apply.
1) What is a money market account?
A money market account (MMA) — also known as a money market deposit account (MMDA) — is a type of savings account that typically offers higher interest rates than regular savings, but with special requirements and limitations.
2) Is a money market account the same thing as a money market fund?
No. A money market fund is a low-risk investment vehicle that is not federally insured. A money market account is a risk-free savings option that is federally insured.
3) Why choose a money market account over a regular savings account?
Typically, a money market account offers higher interest than a regular savings account. This is not always the case, however, so be sure to shop around for the best rate you can find.
4) Why choose a money market account over a certificate of deposit (CD)?
Though a certificate of deposit typically offers a higher interest rate than a money market account, the CD option has stricter terms. Even short-term CDs prevent you from accessing your money for months at a time (though you may do so with a penalty). Money market accounts, on the other hand, allow a certain number of withdrawals every month, penalty-free.
5) Why should I put my money into a money market account?
Even though a money market account typically offers higher interest than a regular savings account, the difference is not always that substantial. So if you’re looking to maximize your earning potential, and you can tolerate some risk, you may want to consider other investment options.
6) How do I open a money market account?
You can open a money market account through a bank or credit union.
7) Are money market accounts federally insured?
Yes. If you open your money market account with a bank, it is FDIC insured. If you open your money market account with a credit union, it is NCUA insured.
8) Is there a minimum balance requirement for a money market account?
Often there is a minimum balance requirement, but not always. You will likely find, though, that the higher the minimum balance required, the higher the interest rate.
9) Can I take money out of my money market account?
The number of withdrawals you are allowed on your money market account depends on the terms of the particular bank or credit union through which you opened your account.
10) How much interest is earned on a money market account?
It varies. Interest earned is typically higher than that of a savings account, but not always.
11) How often is interest compounded and paid on a money market account?
Interest on a money market account is usually compounded daily.
12) Can checks be written from a money market account?
It depends on the terms. Some money market accounts allow check-writing (as well as debit card use), and some don’t.
13) Where can I go to compare money market account options?
There are a number of online websites where you can compare the best money market terms on any given day, like Bankrate and NerdWallet.
14) What to look for when shopping for a money market account
In your comparison of money market accounts, be sure to look at:
- Interest rate
- Monthly fee and how to avoid i.
- Minimum balance required
- Number of withdrawals you are allowed per month
- Restrictions on the amount you can withdraw at any one time
- Fee for excess withdrawals
- Number of checks you are allowed to write per month