What Is a Money Market Account?

A money market account is a high-interest savings account that also shares some resources with checking accounts. If you have enough money to open one, it can be a useful savings tool that allows you limited access to your funds while earning more interest than a traditional savings account.

Money market accounts combine some of the best features of checking and savings accounts, but each type of account has its pros and cons.

While you get certain features with these types of accounts, you may have to give up others. Learn more about how money market accounts work and when you might want one.

What is a money market account?

A money market account (MMA) is essentially a savings account that has some of the characteristics of a checking account.

Typically, you will receive checks or a debit card and will be able to do a few transactions a month, but you will not have the freedom of a typical checking account.

There are also some important differences between money market accounts and traditional savings accounts, including higher minimum deposit requirements and better interest rates for MMAs.

Alternative Names: Money Market Deposit Account, Money Markey Savings Account
Acronyms: MMA, MMDA, MMSA

With a money market account, you will normally be able to write a limited number of checks, unlike a traditional checking account.

How a money market account works

Many banks and credit unions offer money market account options, both in-person and online. Today, many banks offer accounts with a minimum balance of $ 0.

If your bank provides checks to your MMA, it will provide them along with the rest of the account documentation, detailing terms such as the maximum number of transactions per month...

Your account terms will also explain your Annual Percentage Yield (APY), which is the rate at which your MMA will receive compound interest over the course of a year.

So for example, if you put $ 10,000 into an MMA with 0.29% APY on January 1 and don't add any more money, at the end of the year you have $ 10,029.

As long as your bank with an FDIC-insured institution (or an NCUSIF-insured credit union), your money market account, combined with any other bank account balance at the same institution, will be insured up to a total of $ 250,000 for a single account or $ 500,000 for a joint account ($ 250,000 for each joint account holder).

Pros and cons of money market accounts

Pros

Insured up to the limits of the FDIC or NCUIF

Pays more interest than some traditional savings accounts

Money is very affordable

Cons

A limited number of transactions per month

Introductory interest rates may be higher than actual APY

It may not be insured in some institutions.

We hope you enjoy watching this video about what is a money market account

Source: The Ramsey Show - Highlights

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