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[A70]A Money Market Account

by Bill Riley, Bil

A money market account (MMA) is a kind of savings account offered by banks and credit unions. The difference between the normal savings account and the money market account is that the MMA offers higher interest rates. However, the money market account requires a higher minimum balance than the normal savings account.

The important feature of MMA is that the money saved in the bank under this option is insured by the Federal Deposit Insurance Corporation (FDIC). With this insurance facility, you can ensure the safety of your deposit; even if the bank goes bankrupt, you will not lose a single penny from your savings. The FDIC was formed in 1933 with a view to save the customers, especially those of the failed banks.

Money market account works in a similar manner as a normal account works. You earn interest for your deposits, and as you wish you can withdraw any amount of money from it. However, there are certain limitations for the number of transactions in a month; usually an MMA account enables you to have three to six withdrawals and a maximum three checks a month. The bank will charge you a service fees for any extra transactions from your account. Normally it is between $5 and $15 per extra check in a month. Also you will be penalized if your account runs short of the minimum balance as per the terms of the bank. These service charges, however, may differ from bank to bank. It is advisable that you do a thorough study on the operation of the MMA of different banks before selecting the one for you, so that you don't lose the money in the form of hefty service charges.

As soon as you join an MMA, you will be issued an account register, in which you will record your transactions clearly. At the end of each month, the bank will send you a statement of the transactions, by which you can verify the account details. If you keep this MMA run properly, by maintaining a good credit history and transactions, you are likely to benefit more from the high-interest savings than any other similar savings accounts.

Some banks and credit unions offer a modified version of MMA. It is called the High Yield Money Market Investment Account (HY MMIA). This is meant for accounts that can keep reasonably higher account balance. If your account balance is above certain limit (often stipulated by the banks), you will be able to convert your MMA into HY MMIA. The HY MMIA offers interest rates in proportion to the account balance. Higher the balance, higher is your savings as interest. This kind of interest rate offered by HY MMIA is often referred as ‘tiered' interest rates. As in the MMA, this account also allows you to withdraw the money as per your requirements.

In short, the money market account is a disciplined and efficient way of saving money. Also the involvement of FDIA with MMA makes it one of the most secure forms of deposits through banks.

Before delving into these types of account issues, it is important to understand that these accounts are not the same as money market funds accounts. They are two different vehicles and knowing the difference is important.

"Money market" is a generic term that is used to describe the market in which banks and other financial institutions lend, borrow and trade money. With this being the basis of the term, a market account is basically a premium account, or a high interest savings account.

This type of fund, on the other hand, is an investment technique and is more akin to working the stock market than it is to savings account holdings.

You can usually open a money account by simply visiting your bank and setting up an account. The cash that you put into this account will then be invested by the bank into various financial instruments such as certificates of deposit or treasury bills. The investments that the bank participates in are almost always very safe investments. These are low risk, short-term investments, and your gain for allowing the bank to use your cash is a premium interest rate. This higher rate can often be as much as two times higher than a typical savings account.

Protection of your money is a key element to a market account and you should understand that this type of account that is hosted by your bank is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000. However, if you decide to open this type of account with an entity that is not covered by the FDIC you can lose your money if that company or entity files bankruptcy.

It is not at all uncommon for corporations to offer what looks like a money market account and they will often offer higher interest rates than what you might find at your bank, but, again, be sure you understand the risks associated with this type of account.

Most money accounts come with certain restrictions, and those restrictions can vary from one place to another. One restriction that is common is that your money, once it is placed into the account, may not be fluid. What this means is that you may not be able to walk in and withdraw it immediately. There may be a time lag and there may be a penalty. Also, most money market accounts require a minimum deposit in order to open the account. The bank sets this minimum amount, and they may also impose a minimum balance that must be kept in the account at all times. You are allowed to withdraw money from your account but often there is a maximum amount you are allowed to withdraw in a 30-day period.

Article Source : Best Money Market

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Both Bill Riley & Peter Kenny are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Bill Riley has sinced written about articles on various topics from Best Money Market, Finances and Mortgage. Bill Riley has always been interested in money, and enjoys giving others credit and .. Bill Riley's top article generates over 40500 views. to your Favourites.

Peter Kenny has sinced written about articles on various topics from Credit Cards, Finances and Best Money Market. Peter Kenny is a writer for The Thrifty Scot, please visit us at and. Peter Kenny's top article generates over 368000 views. to your Favourites.