Money Market Account Rates: Compare Top Rates

Money Market Accounts
In some cases, it is desirable to have an account that earns interest like a savings account, but that allows check writing privileges. In such situations, many choose to get a money market account.

What is a Money Market Account?

Like many other cash products, a money market account is an interest bearing account whose yield is set with reference to the Fed Funds Rate. Banks can choose to offer a higher rate if they would like. In many cases, the yield on a money market account is higher than what you would see on a savings account. If interest rates go up, a money market account can yield even more.
A money market account is considered to be a deposit account. This means that, under Federal Reserve regulations, there is a limit to the number of withdrawals that can be made on a money market account. You can make no more than six withdrawals a month on a money market account. As a result, if you exceed that number, the bank can close your account. Some banks have their own limits – usually three or four per month – and once you reach that threshold, you may be charged a penalty.

One of the most convenient things about a money market account is the ability to write checks. While the money market account earns interest like a savings account, and is subject to many of the same restrictions, it nonetheless has check writing privileges. This means that you can use your money market deposit account to write checks for bills, investments or other items – as long as you don’t exceed the maximum number of withdrawals.

A money market account is covered by FDIC insurance. So, if the bank fails, you can still get your money back.

Money Market Mutual Fund

It is important to note that there is a difference between a money market account and a money market mutual fund. A money market mutual fund is not a deposit account; it is, in fact, a mutual fund. Investments, such as cash products, and certain bonds, are included in many money market mutual funds. These often boast higher returns that cash products, though, and are considered quite safe. It is also worth noting that some money market funds do allow you to write a limited number of checks. This can contribute to confusion about the type of account you have.

However, even though money market mutual funds are considered safe, you should be aware that they can still lose money. It is rare, but it has happened. Also, money market mutual funds are not FDIC insured. This means that if the institution offering a fund fails, you don’t have recourse from the FDIC, and you could lose your money.

It is important that you understand the difference between a money market fund and a money market account. Otherwise, you might be unpleasantly surprised. Both of these types of accounts can be useful, but you need to make sure which you plan to use.