Money Market Accounts and You

Money Market Accounts and You

Money market accounts can be an appealing way to do your banking, especially if you want to earn more interest on more than just your savings account. However, there are both pros and cons to putting your money into a money market deposit account (MMDA). Let’s take a look at a few of these together and you’ll see what I mean.

Pros of Money Market Accounts

Money market accounts generally pay a higher interest rate that regular banking accounts. This means that the more you deposit, the more interest your account will generate on a month-to-month basis. These accounts are just as easy to keep track of as a regular checking or savings account, with most bank’s having their customer’s account access online. In addition, these money market accounts qualify for protection by the Federal Deposit Insurance Corporation (FDIC). Keep in mind that the current maximum covered per account is $250,000. This is a federally mandated increase that is set to expire in January 2014 unless it is renewed or extended by congress. There are some qualification conditions, so be sure and check with your banking institution to make sure your account is covered.

Cons of Money Market Accounts

There is usually a higher minimum deposit on a money market account than a standard banking account. This is because of the higher interest rate that is paid out. This balance must be maintained each month in order for the account to qualify for the interest rate. Some banks may even impose a penalty if your balance falls below the minimum at the end of the monthly balance sheet. As a general rule, money market accounts are intended as a method of longer-term savings. Because of this, there is usually a limit to the number of withdrawals you can make from the account each month or quarter. This is a very important factor in determining if a money market account is right for you, so be sure and ask about this aspect in particular. Additional fees are associated with going beyond the limited number of withdrawals as well.


The bottom line is that a money market account can be a great vehicle for a low-risk, long-term investment, but only if it meets your other needs as well. If you do decide to open a money market account, be sure and check around with several banks in your area to see which one offers the best interest rate and has the lowest barrier to entry (minimum deposit), if that is a concern for you.