Money Market Accounts – A Boon to the Wealthy

Money market account is similar to savings bank account that is offered by banks and credit unions which invest in government and corporate securities. It will pay you a much higher interest rate but you must also make a higher initial deposit which should be higher than the average. The minimum deposit itself is around $2,500 but there is no limit to the amount you want to deposit. The more the quantum of money you deposit, the more interest you gain. But the number of withdrawals is restricted in a money market account. A maximum of six withdrawals is permitted per month.

You can open a money market account when you have a huge sum of money at your disposal which you do not need for immediate use. This money will fetch you more interest in a money market account than a regular savings account.

The interest you get from the bank or the credit union is the money they pay for letting them use your money to give as loan to borrowers. Here what happens is the bank uses your money and charges more interest from the borrowers but pay you a certain interest amount which is high but lesser than what they get. But this money itself is a significant amount.

Since the invested amount by the depositor is very high, the bank does not collect any fees from the depositors. This is an advantage as it increases your account and also the rate of interest you acquire.

In addition to this advantage, the interest in money market account is compounded on a regular basis. This assures that you start gaining interest on the interest which you make, that is you get a double interest.

The interest rates paid by the money market account vary from bank to bank. So, it is wise to go through the interest rate offered by the bank, and know the minimum balance you are expected to keep in your account.

Withdrawing money from the account: taking out money from your account has some limitations and also you may have to pay a fee. If you withdraw more than the limit prescribed, yet again you have to pay heavier fees. As mentioned before, there is also a limit on the number of times you can make a withdrawal per month.

The money in a money market account is insured by the Federal Deposit Insurance Corporation (FDIC) which means that even if the bank or the credit union goes out of business; your money is still safe and will be returned.

With credit unions, your money is insured by the National Credit Union Administration (NCUA) that again protects consumers from losses.

Another advantage of holding a money market account is that you can add more money to your account any month. This way you increase your amount in your account as well the interest also grows.

Closing a money market account cannot be done in a hurry. Once you open a money market account, your account should be in the bank for at least a period of six months. Otherwise you may risk paying a heavy penalty or even getting your account shut.

To conclude, money market is best suited for people who deposit huge amounts and those who are in no hurry to withdraw their amount from the bank.