Money Market Accounts

What are Money Market Accounts Exactly?

MMA’s (or Money Market Accounts) are a particular type of savings account which not only provide generous interest rates but also provide reasonable liquidity. With most MMA’s there is a limit to how many withdraws one can make per month. In most cases these accounts permit 6 withdrawals per month, 3 of which can be made through personal check. These instruments also come with variable interest rates which are subject to change without notice.

You can open one of these either with a credit union or bank. Most banks and credit unions will require you to apply for this account in person, however, there are a handful of federally insured online MMA’s which you may open from anywhere within the United States (see table above).

Money Market Accounts VS Online Savings Accounts

The term “Online Savings Account” is frequently synonymous with the term “Money Market Account.” Online savings accounts may offer rates comparable to current money market rates but with subtle account differences such as, no minimum balance requirements or no maintenance fees. This is why many banking consumers frequently group money market accounts and online savings accounts together. Typically both accounts will serve similar functions.

Why invest in a Money Market Account?

Money market accounts aren’t used as aggressive investment vehicles. Money market accounts are primarily used to preserve your buying power. The rates that money market accounts offer will almost always beat inflation, thus keeping your money safe and secure for any duration of time. Some investment advisers will recommend partnering your money market accounts with IRAs (individual retirement accounts) so that your interest accumulates in an un-taxed fashion and are allowed to compound. Over the years, your money will grow considerably faster without the annual interest income taxation and you can withdraw from a ROTH IRA without paying any taxes.

In the chart above you can see that banks compete against each other by offering slightly different rates, minimum balance requirements, and access to your money. To find the best money market account rates check back with this page regularly before investing.