Have you heard about money market account? Maybe most of us never heard about this concept from bank.
Money market account (MMA) or money market deposit account (MMDA) is a deposit account offered by a bank which interest in government and corporate securities and pays the depositor interest based on current interest rates in the money markets. It have high rate interest and require a higher minimum balance to earn interest or avoid monthly fees. (Wikipedia)
INVESTOPEDIA EXPLAINS ‘MONEY MARKET ACCOUNT’
Money market accounts are widely available, and are offered by banks and other financial institutions. They are able to offer a higher interest rate by requiring a higher minimum balance, and by placing restrictions on the number of withdrawals the account holder may take over a given period of time. This restriction makes them less liquid than a checking account, but more liquid than bonds.
Similar to the interest earned on checking and savings accounts, the interest earned on a money market account is taxable. Account holders do not have to buy shares in a money market account, as interest earned on deposits is similar to interest earned on checking and savings accounts.
Banks issuing money market accounts take a low-risk approach when investing deposits, investing in certificates of deposit, government securities, and commercial paper.
Investors looking to purchase shares in a savings-like account can do so through a money market mutual fund, which typically has a share price of $1. (Investopedia)
Money market account is like an intermediate stage between a savings account and certificate of deposit. It’s less liquid than a savings account but more than certificate deposit.
There’s a difference between money market accounts and money market funds.
Money market funds are more like mutual funds. They are an investment in the debt market. They are not backed by FDIC insurance and you cannot withdraw your money as easily. Money market accounts are much more like savings accounts. The money sits there, gathering interest, and the owner of the account can pull it out at any time.
Money Market Account Interest is usually compounded daily and paid monthly. The best part of this method is bank will pay you interest on the money they’ve paid you in interest. Interest rates paid by money market accounts can vary quite a bit from bank to bank.
You also can withdraw your money whenever you want but you must always look at this :-
1. Interest rate paid on the balance.
2. Minimum balance requirement
3. Fees and services charges on the account
You will get small book called a register where you write your beginning balance and all your future deposits and withdrawals. It will help to track your usage.