What Exactly Is A Money Market Account?

7/12/2017

What Exactly is a Money Market Account?

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How is a money market account different from a savings account?

Dear Kim,

I am hoping you can answer my question.  We have always had a traditional savings account. The interest rate that is being accrued on the account is abysmal and the bank recommended that I look into a money market account. What exactly is a money market account?

Thanks,
Andrea

 

Dear Andrea,

A money market account is a type of savings account. The account typically accrues more interest than a traditional savings account, but there are some stipulations to this account. Usually, the initial deposit and balance requirement on a money market account are higher than those on a traditional account. The average minimum balance is typically between $1000 and $2500. There are restrictions on access to the account.  Federal regulation prohibits more than 6 monthly pre-authorized or electronic payments, withdrawals or outgoing transactions from a money market account.  There is typically a fee charged for each transaction after that.

The funds in a money market account are protected by the FDIC if in a bank, or NCUA if in a credit union. A money market account is a great place to keep money for an emergency savings account. An emergency savings account should be used sparingly. It is recommended that you have a minimum of three months expenses saved in the account. The money market account will allow you access to your money and provide a higher interest rate.

I suggest that you shop around for the best deal. Websites like Bankrate.com will provide you with current interest rates. Interest rates will differ from bank to bank. I wish you all the best and congratulate you on your goal to save!

Thanks!
Kim

 

 

 

 

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