The Importance Of Understanding How A Money Market Account Works

As consumers make decisions on what to do with their savings and how to properly invest their money, it becomes a matter of importance on finding out which accounts and funds will be best for their particular financial situations. Understanding exactly how a money market account works can help consumers to make an informed decision about their financial futures. While accounts may vary in terms of interest rates and terms and conditions at different banks, the premise behind a money market account is the same at each bank. It then becomes important to widen the scope in terms of finding out the best rates available at each bank, and the types of limitations they may be in terms of withdrawing money as well. These types of accounts are not untouchable once opened, however there may be certain restrictions or penalties involved when making a withdrawal.

Money market accounts are very similar to a normal savings account, and are offered by both banks and credit unions. They are fully insured by the Federal Deposit Insurance Corporation (FDIC), and for credit unions, they are insured by the National Credit Union Administration (NCUA). In both banks and credit unions, the minimum deposit is always greater than that of a normal savings account, with minimums starting at $1000. The main difference in a money market account is that the higher the amount of money is in the account, the higher the interest rate is. Each bank’s interest rate changes on a regular basis, so it’s important to consistently check interest rates for each bank. This type of account is not classified as a transaction account, therefore withdrawal and check writing options are limited in most cases to less than six withdrawals per month. Banks will charge high fees on customers who exceed existing withdrawal limits. Currently, interest for money market savings accounts are a bit above one percent for a minimum $1,000 balance, and can earn as much as two percent with balances above $10,000.

Opening a money market account during unstable financial times can make a lot of sense for many consumers. Since 2007, many mutual fund accounts have lost money, and more and more investors and consumers are turning to safer investment options. Since money markets are all insured and have at least a one percent return on investment, it’s a whole lot better than seeing your money go down the drain with failed mutual funds during times of economic trouble.