What are money market accounts?

Do you ever wonder how your money can grow in banks?  Well it works in a simple way. Whether you are dealing with certificate of deposit or a traditional savings account it is always a trend that the longer you allow your money to stay in the bank the higher interest your deposit can earn. This is because the money you are keeping in the bank is being utilized, for instance, in providing loans to other people. Through lending, other people pay the bank interest, which the bank can then pass on to your account. The longer you let the bank use your money, the higher interest they will pay you. Of course, if you need your money, you can withdraw them whenever you wish but some accounts like the CD will charge fines.

The same pattern is happening with money market savings account. This account is quite similar with a regular savings account, with a few subtle differences. Among the difference include a requirement for higher minimum balance because it will also generate higher interest rate compared to other savings account. Consumers are also allowed to withdraw funds at a maximum of six times in a term.

Another feature of money market accounts is that all the deposited money is insured by the Federal Deposit Insurance Company (FDIC). This is an assurance for account holder that even if the bank they trusted collapsed, they can still recover their money through FDIC.  Before the institution of the FDIC, in the 1920s in particular, several banks collapsed, leaving depositors with nothing and this incident has led to widespread poverty in the country. Because of this, the FDIC was created to protect the interests of bank depositors. Another federal agency, the National Credit Union Administration (NCUA) is responsible in insuring money market accounts issued by credit unions.      

Interests offered with money market accounts are higher than the regular savings account. There is also less restriction in accessing the fund, unlike the certificate of deposit where consumers must wait for the maturity date or risk being penalized. Unlike CDs, however, interest rates for money market accounts can change monthly, so it is important for the depositor to monitor market rates before they decide to withdraw their money.

Money market account is just another way on how people can keep their money safe in banks at less risk. And just like other types of savings accounts shopping around is the best way to get hold of the best offer available in the market. Jumping into the first offer you encounter defeats the purpose of comparison shopping; thus, it is not an ideal thing to do.