Why entrust your money with an MMDA?

There are three distinct disadvantages to having a money market deposit account (MMDA). Due to the features of this account, it is recommended for those who are retirees or investors who want to store their money and still want it to be accessible. The money market deposit account should be known for its security and high-yielding returns but the option may not be the best for you. You should always do your homework before making any major decision regarding money.

Disadvantages

• High maintaining balance.
  When the MMDA was first created through law in 1982, the maintaining balance for each account was set at US$1,000 but today, there are accounts which can be opened at US$500. Regardless, it is still a considerable amount of money to be merely a maintaining balance. This is why many people may not be suited to applying for this type of account.
• The interest rates may vary.
  Since this account is market-sensitive, the interest rates that affect this account can change through time. Moreover, different institutions may also have different interest rates—there are no restrictions and it is the prerogative of the bank to dictate the interest rate.
• The account will only allow for a limited number of withdrawals.
  While this restriction can prevent you from withdrawing too much, it can also be a hindrance when you really need your money. But remember, a higher balance in your account also equates to higher returns.

Advantages

• The investment opportunity is similar to that of mutual funds, stocks and bonds.
  This account is market-sensitive and it can reap the same profits you can get with playing in the stock market.
• Storing your money in this type of account is quite convenient especially when you are waiting to use it for an even bigger investment in the future.
• Banks are not the only providers or hosts of money market accounts.
  Mutual fund companies and other brokerage companies can also give this option to the depositor. This means that you have more options. You can select which one has the best interest rates.
• You can easily access your funds compared with other investment options.
  Some money market accounts offer checking options or the option of using a debit card. Moreover, there are no withdrawal penalties from an MMDA and this will be really a convenience for certain emergencies that cannot be predicted.