A money market account, or MMA, is a kind of savings account that is often associated with benefits such as having access to debit cards and check writing. Traditionally, the interest rates offered by these kinds of accounts tend to be higher when compared to those of traditional savings accounts.
But on the flip side, they do require you to have a much larger operating minimum balance. With credit unions, these accounts are insured by the National Credit Union Administration, and for the banks, the insurance is handled by the Federal Deposit Insurance Corporation (FDIC).
How Do Money Market Accounts Work?
When money is deposited in the MMA, it will earn interest in the same manner as a normal savings account would. The interest, in this case, will be the money that the credit union or bank pays its clients, so that they can use the funds for loans being offered to their other customers. However, this is not to mean that you cannot access your money whenever you need it. The process works in the following manner:
You visit your bank and open a money market account. The bank will then pay you an interest based on the amount that you placed and left in that account. This money is loaned to other individuals. The bank will, however, charge the borrowers a higher interest rate for these loans than what they are paying you. The money in this account is normally compounded on a daily and monthly basis. The rates paid will normally vary from one bank to the next.
Another important difference you ought to note is that the more money you have in your account, the higher your interest rate is bound to be. It is, therefore, essential to check with your bank to understand how this rate may change with time.
Money Market Account Management
As is the case with a traditional savings account, you still get to withdraw money from the account when you require it. The only difference here is that your withdrawals will be limited to a few times each month. If you are unable to maintain a particular amount of money in the account, a certain fee will be applied by the bank. You can also expect another fee to be charged if you make too many withdrawals above the set limit (usually six times a month).
When you open this account, you are given a tiny book, commonly called the register. Here, you have to write down your opening balance and any other deposit or withdrawal that you make in the future. Although the bank or union will send you an account balance each month, this register helps you keep track of all the transactions taking place in your account.
Should You Open A Money Market Account?
A person looking to deposit a large sum of money, and in need of a safe place to do it, ought to consider operating a money market account. The money will not only be safe, but it will also earn you interest for the duration that it will be in that account. It is also a good option for that person who wants to deposit funds in a secure facility and get a debit card that they can use to withdraw funds a few times each month. One of our San Bernardino financial planners can help you understand money market accounts more in-depth.
Make sure to do your own research before opening a money market account. Different facilities will have different interest rates and different operating balances. Go to a facility whose conditions align with your current and future needs. Compare interest rates and take note of how many times you can take money out per month, so as to avoid any unnecessary fees.