What is a Money Market Account?
October 23, 2020
By Rahul Iyer
A money market account is similar to a savings account, but it has some checking features. These accounts usually offer checks and a debit card. Money market accounts typically allow a limited amount of transactions monthly. Money market accounts once offered higher interest rates for account holders than standard savings accounts; however, this advantage is beginning to disappear as the interest rates offered by money market accounts are getting closer to savings accounts.
While savings accounts are far more popular than money market accounts, both accounts have the same low-level of risk. Money market accounts are insured by the Federal Deposit Insurance Corporation and the National Credit Union Administration depending on whether it is being offered by a bank or a credit union. This means that your deposits will be safe even if the company suddenly falls into difficulties.
The Advantages of Money Market Accounts
Access to the funds in your money market account is a little easier since you are able to use checks or a debit card. These two options make a money market account more useful in emergencies than standard savings accounts.
While the interest rates for money market accounts are not as great as they were in the past, they are still better than the average checking account. This means that your money will be much more likely to survive the attacks of inflation in a money market account.
As mentioned before, your money will remain safe even if the institution with which you have your money market account goes under. This is so because money market accounts are also insured by the Federal Deposit Insurance Corporation.
The Disadvantages of Money Market Accounts
Since you have more than one way that you can use to spend funds in a money market account, it makes spending money a little too easy. This can be a challenge for people who are not very disciplined with the management of their funds.
Another disadvantage of maintaining a money market account is that they usually require higher minimum balances to avoid fees. You usually need more money to open money market accounts than you would need for a savings account or regular checking account.
Which to Choose? Savings Account or Money Market Accounts?
If your bank offers both savings accounts and money market accounts, you may be wondering which to choose. You may want to stick to a savings account to avoid the high amount that it takes to keep money market accounts active without fees. On the other hand, if the money market accounts that you are considering offers a higher interest rate than the savings account, you could consider going with the money market account.