What Is A Money Market Account ?

Money Market Definition

So what is a money market account? This is a type of account offered by banks and other financial institutions that is very similar to a standard savings account. The difference with this type of account is that it generally pays a higher interest rate.

The drawback for this higher rate is that a higher minimum balance if often required ($1000-$2500) and fewer withdrawals are allowed, usually 3-6 per month. Like a checking account you also have the ability to write up to 3 checks per month.

Another benefit to a money market account is that your deposit is FDIC insured (Federal Deposit Insurance Corporation), this means that should the bank become bankrupt you money is safe and you will receive your deposit back through this federal insurance program. Money deposited into a credit unions is insured through NCUA (National Credit Union Administration) also a federal agency.

Interest paid on these account is compounded daily and paid monthly. This interest is then applied back to the principle amount, you are then paid interest on the interest - Free Money! That’s what we like! The interest paid can vary greatly, so shop around for the best deal.

The drawbacks to a money market account as mentioned before is the lack of flexibility, fee’s are payable (usually $5-$10 per occurrence) for falling below the minimum balance, exceeding the number of monthly withdrawals an so on.

So when is a money market right for you?

If you have a decent amount of money and you are not sure what to do with it.

You don’t mind the reduced flexibility.

You want a better interest rate with no risk.

If this is the case then consider a money market account.

What Is A Money Market?