Actually, a Money Market Deposit Account is more of a savings account. But, it has checking features along with the ability to withdraw funds via a debit card. So, it seems more like a checking account.
The purpose of a Money Market Account is to generate a higher interest rate by the bank based on the fact that they are able to invest the money with more discretion and earn a higher rate of return themselves which they can in turn, share with the account holder.
Fees. Since this is a deposit account, there are strict guidelines governing in the movement of money in and out of the account. If you need to withdrawal more than a set amount of times during a calendar month, you will pay a fee. There might be other service charges on the account as well.
Restrictions. The first place you will find a restriction is in the high minimum balance that must be kept in order to avoid a fee. Some banks require a $1,000.00 minimum, but others are higher.
The other restriction is on how many times you can make withdrawals in a month. Three to six is the range. Some banks will consider a debit card withdrawal a part of the limitations and some do not.
Interest rate. The rate of interest varies with each bank. The rates are, however, higher than a standard checking or savings account. You can find rates in the 5% category for money market accounts.
Do not confuse money market accounts with money market funds. Money market funds are a kind of mutual fund which is a regulated investment company. A money market account is really a liability account of a bank. It is a note on their books that they owe the account holder a certain amount of money.
Money market accounts are backed by the FDIC if in a traditional bank. In a credit union, the funds are guaranteed by the NCUA. These institutions guarantee your deposit amount up to a certain dollar figure in the event of a major financial circumstance. The FDIC was started right after the great depression of the late 1920s and early 1930s in response to the collapse of the financial institutions of that day.
Your money will earn a higher interest rate while still being available for you to have access to, so a money market account make good financial sense.
Hi, I found this very useful.
I Wasnt really aware of the real differences between Money Market Account and Checking Accouns.
Given the financial climate we are in at the moment I am glad that I have taken the time to read through your Blog.
Cheers
Clare
This has been really helpful. I am learning about banking term and this has been explain very clearly.
Good job