A money market account (MMA) is a type of interest-bearing deposit account offered by banks, credit unions, and other financial institutions. Money market accounts are considered a type of savings account, but they often offer some features of both savings and checking accounts. Here are key characteristics of money market accounts:
Interest Bearing:
Money market accounts typically earn interest, and the interest rates are usually higher than those offered by regular savings accounts. However, the rates may not be as high as those associated with riskier investments.
Liquidity:
Money market accounts provide a high level of liquidity, allowing account holders to make withdrawals or transfers more frequently than with some other types of savings or investment accounts. However, there are usually limits on the number of transactions allowed per month.
Check Writing:
Some money market accounts come with the ability to write checks or use a debit card, providing a level of accessibility similar to a checking account. However, there may be restrictions on the number of checks or transactions allowed each month.
Minimum Balance Requirements:
Many money market accounts have minimum balance requirements, and fees may be assessed if the account balance falls below a certain threshold. Higher balances may earn higher interest rates.
FDIC or NCUA Insurance:
Money market accounts offered by banks are typically insured by the Federal Deposit Insurance Corporation (FDIC), while those offered by credit unions are insured by the National Credit Union Administration (NCUA). This insurance protects account holders up to a certain limit in case the financial institution fails.
Safety:
Money market accounts are considered relatively safe compared to riskier investment options because they are typically invested in low-risk, short-term securities such as Treasury bills and certificates of deposit.
It's important to note that money market accounts are different from money market funds, which are investment products that are not insured and can fluctuate in value. Money market accounts, on the other hand, are deposit accounts and offer a more stable value.
Before opening a money market account, it's advisable to carefully review the terms and conditions, including interest rates, fees, and any restrictions on withdrawals or transactions.
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