Money Market Accounts
What are Money Market Accounts?
A money market account can be easily explained by comparing it to a type of savings account that is offered by banks and credit unions.
So, what’s the difference between a money market account and a savings account? Money market accounts differ from savings accounts in the following ways:
- 1. They usually pay higher interest,
2. A money market account requires a higher minimum balance ($1000-$2500)
3. Withdrawals are limited, ie, three to six withdrawals per month.
4. Many money market accounts allow up to three checks to be written each month.
Money Market Account Insurance
Your money market account balance is insured by the Federal Deposit Insurance Corporation (FDIC), which means that even if the bank or credit union goes out of business your money is safe. The FDIC, created in response to the economic crash of the 20s, will only insure up to $100,000 per person – which is adequate for most. (There has never been an instance where anyone has lost money insured by the FDIC.)
The National Credit Union Administration (NCUA) insures money market accounts held by credit unions as opposed to the FDIC.
Interest Rates on Money Market Accounts
Interest on money market savings accounts is usually compounded daily and paid monthly. Compounded interest means the bank is paying you interest on not only the value of your deposits but also the interest accrued on that money – which is great news in any language.
Here’s the key: if you want to see your savings grow at an accelerated rate make regular deposits into you money market account.
Interest rates paid by money market accounts can vary depending on the bank/credit union so shop around before choosing a nest for your egg. Finding a high interest money market account rate will depend on your balance – the more money the higher the interest. Always check with the bank about how the interest rate may change and don’t hesitate to change banks if you aren’t getting a good return on your money.
Money Market Accounts Costs
Money market accounts permit you to withdraw funds whenever you wish, however, you can expect to have a limit imposed – usually six withdrawals a month.
To exceed this amount will incur a fee of around $5 on each withdrawal. Banks usually charge a fee if your money market account balance drops below a set sum – a fee of this kind can be somewhere between $5-$10.
Shopping around for any product ensures you get the best deal and money market accounts are no different. Compare money market account to find a bank offering the best deal. Things you should look at include:
- Fees and services charges on the account
- Minimum balance requirements
- Interest rate paid on your balance
Make yourself at home in our Forum and find out what everyone else thinks about money market accounts in America. There is also our up-to-date News section for all the latest on personal finance. If you need help finding a provider or would like to review a company, please don’t go without checking out our A-Z directory.
