What is a Money Market Account?
BANKING

What is a Money Market Account?

A money market account is a great of maximizing your cash, while keeping it safe at all times. However, for some consumers this may not prove to be as a better investment deal than others. Through this article, we’ll look into the common features of a money market account.

Before taking our discussions any further, it’s noteworthy that a money market account is not same as a money market funds account. They are completely different from one another and it’s best to know those differences thoroughly.

The term “Money market” describes the market where banks and other financial institutions lend, borrow, and trade money. This being said, it should be understood that a money market account is in general a high interest savings account or a premium account.

On the other hand, the money market fund is an investment system and works mostly with the stock market.

You can simply open a money market account setting up an account with your bank. This money is then invested by the bank in several financial investments. These investments are extremely safe and ensure a high return rate. And in return of allowing the bank to invest your money, the bank offers you a higher interest rate than normal savings account. This rate can sometimes be even twice as high as the normal interest rate.

You should note down that the money market accounts hosted by your banks are under the insurance of FDIC for up to $100000. However, if you decide to open a money market account with a company that’s not insured by FDIC, you risk losing your money in case that company goes bankrupt.

There are many corporations that offers accounts like the money market account and can even offer higher interest rates, but there the risk of losing your money and you should understand that risk before investing.

There are several restrictions on a money market account, which vary from bank to bank. But a common restriction is that you may not be able to withdraw your money at will. There is a certain time lag and even penalties in some cases. Also, it’s mandatory for most accounts to have a minimum deposit for the account and also imposes that a minimum balance has to be left in the account at all times. Also there are often restrictions on the maximum amount of money you can withdraw in a period of 30 days.

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