What are the similarities and differences between money market funds and money market accounts?

There are actually two types of money market vehicles that are sometimes confused with one another: money market accounts and money market funds.

Money market fund and money market accounts both contain the word money market. Both funds invest in short-term investments. Money market fund and money market account are both flexible and highly liquid investments. These investments offer higher rates of return than traditional savings accounts due to the fact that the short-term investments they use have the potential for higher returns. Checks may be written against these accounts and ATM withdrawals can be made as well.

A Money Market Account (MMA) or Money Market Deposit Account (MMDA) is an interest-bearing deposit account that earns a higher yield than a traditional savings account. Money market accounts are a type of savings account offered by banks. Typically they have limited check-writing privileges and pay higher yields than regular savings and checking accounts. Since money market accounts are bank deposits, they qualify for FDIC insurance. Generally, money market and other bank deposit accounts are now covered for up to $250,000. Regulations allow for only six transfers or withdrawals per month and three checks.

Money market resources, on the other hand, are not bank deposit accounts; they’re a type of mutual fund. Money market funds are more complex – you’ll find more options and you’ll likely earn a slightly higher yield than you’d get from a money market account. Money Market has a Fund which is a mutual fund which tends to be riskier than a money market account. Many money market funds invest in short-term securities such as U.S. Treasury bills, certificates of deposits and other investments backed by the U.S. government. A Money Market Fund:

• Is not FDIC-insured.
• Has high minimum deposit and minimum balance to avoid high fees.  
• A liquid investment that allows for easy withdrawals and check writing
• Has historically provided better yields than money market accounts
• Generally have higher fees than a money market account.
• Maintains the net asset values (NAV) of each share at $1

Making investments in a money market account or a money market fund can be quite confusing. Aside from the similar beginnings, both are being sold in the same financial markets. In making considerations in a given investment, it is necessary to review its prospectus.

Money market accounts are bank alternatives to money market mutual funds. The main factors are risk and choices.