About Money Market Accounts?
A money market account is very similar in structure to more traditional checking and savings accounts. Interest is paid on deposits in both instances however money market accounts. due to their higher interest. tend to limit the amount of withdrawals to 6 per month. If you have large cash balances and don't need to write a lot of checks then a money market account can have the added benefit of increased interest payments.
For many years banks and credit unions only offered their customers checking and savings accounts. For many individuals the only account which earned interest was the basic and passport savings account. While these accounts didn't earn any significant amounts of interest on their balances they had the benefit of being highly liquid meaning you could access the full balance at any time for any reason. After a while, financial institutions realized a number of their customers had a relatively high fixed balance from month to month who would sometimes withdraw these funds to make purchases in investments like stocks and bonds to try and obtain higher returns. In an effort to diversify their investment offerings to customers money market accounts were created to offer higher interest returns with some limitations. This worked for a number of customers who liked the increased interest payments while still having availability to the funds and avoiding riskier investments.
Money market accounts are similar in structure to savings accounts and insured by the Federal Deposit Insurance Corporation also known as the FDIC for $250,000 per account owner. This is an important consideration because it offers the same protection as a standard savings account but offers a higher rate of return. One of the conditions mentioned was that most money market accounts limit withdrawals to 6 per month. Another limitation is often that due to the higher rate of return these accounts also require higher balances and can incur penalties or maintenance fees if they drop below a certain amount.
It is possible to find even better yields on money market accounts by looking at online only institutions like Internet only banks. These high-yield money market accounts can sometimes offer three or four times the nominal money market account rates due to the decreased costs of having online only operations. Certain corporate entities will also offer high-yield money market accounts which consumers should do their research and be wary of. This is because many investment accounts which may have similar features as a traditional money market account may not be FDIC insured. As a result, if the Corporation fails then all accounts may become insolvent and investors could potentially lose all their money.
There is a difference between a money market account normally offered by banks and credit unions any money market mutual fund which tends to be offered by investment entities like brokers and mutual fund companies. Even though money market mutual funds are highly regulated by the Securities and Exchange Commission they still have inherent risk and may not be for all investors. Money market accounts are a great way to make a little more interest on savings you already have with your financial institution with no additional risk. If you don't write a lot of checks and don't mind having slightly limited access to your funds then a money market account might be right for you.
