You are looking for what is a money market account. A money market account is also known as an interest banking account offered by banks and credit card unions.
If you think it is some type of scam or something no it’s not. The MMA is approved by FDIC or NCUA. You just have to make sure that the owner has an amount of up to $250,000 in their account.
One of the advantages of using this account is that it pays you a higher interest rate. However, it comes with the drawback that the transactions are limited that you make by checks, banks, or credit cards. Whereas, by using an ATM you can make transactions and withdraw an unlimited amount of money.
Furthermore, in this article, we will talk about MMA, how it works, pros, cons, and differences with other bank accounts.
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What is a Money Market Account?
Money market accounts are offered by banks and credit unions which serve as savings and checking accounts. Moreover, they pay you a high interest rate but allow you limited transaction options.
Also, it requires a higher amount of deposit as compared to other accounts such as savings accounts. I believe now it’s clear what is a money market account.
How Does a Money Market Account Work?
A money market account is a mix of savings and checking accounts. Here is the list of features that a MMA account holds.
High Interest
On your account balance, you get an interest rate. Like traditional bank offers a lower interest rate but MMA offers you a little higher rate. Moreover, the amount of rate depends on the market and its trends.
Debit Cards
MMA offers you a debit card for making deposits, withdrawals, and transactions.
Checks
They also give you the facility to write checks.
To start a money market account you need an initial deposit and have to maintain it until the account is active. If the threshold amount goes down below the minimum amount then you will be charged with a penalty. MMA accounts are short-term and can be used for purchases like vacations, house or car down payment.
Advantages and Disadvantages of Money Market Account
Everything comes with its pros and cons. Likewise, the MMA account has some also. Here is the list of it.
Advantages
- High-interest rate
- Debit cards
- Federal Insurance safety
- Checks
Disadvantages
- Limited transactions
- Extra charges if the threshold is not maintained
- The minimum amount required for maintaining an MMA account
Let us now discuss the difference between MMA and other funding accounts.
What is the Difference Between MMA Account & Other Funding Accounts?
What is a money market account and how it is different from other fund accounts? MMA offers you a savings and a checking account together. Plus it also offers you a higher interest rate. If we talk about checking accounts they offer you unlimited deposits and offer you debit cards. Moreover, there is no such difference in all these accounts.
One way or another every account is the same and offering you the same benefits tagging them with different names.
What are the alternatives to a Money Market Account?
Here are some alternatives to money market accounts. Check these out.
Certificates of Deposit (CDs)
In the CDs account the user deposits money for a duration of 3,6,9, or 12 months. And then withdraw it after a certain period with interest. However, if you withdraw it before time you will be charged with a penalty which is a lost interest.
Interest Accounts
In an interest account, you have the same features that you deposit money and get an interest when you withdraw. However, it comes with a disadvantage that you have to make certain debit transactions each month.
Checking Accounts
Checking accounts are better as they give you a sign-up bonus, airline miles, and cashback. However, it comes with the same issues that you have to make a certain transaction and much more.
Passbook Saving Accounts
These regular saving accounts have no fixed deposit or initial starting amount. Also, there is no minimum balance amount required.
Every account has its pros and cons. So, before you sign up for an account make sure you know the terms and conditions.
Conclusion
What is a money market account? It is a savings and checking account together that provides you with a higher interest rate. Moreover, there is a minimum amount you need to hold in your account and maintain it until the account is active. Also, they provide debit card options, transactions, withdrawals, and check-writing.
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FAQs
What is a money market account and how does it work?
Banks offer money market accounts and credit card unions as savings accounts with a higher interest.
How much will $10,000 make in a money market account?
The average money market rate is 1%. For example, if you deposit $10,000 in the account after a year you will get $100 extra as interest. If you invest in the money market you will get $400 as interest.
What is the downside of a money market account?
If the interest rate falls in the market, you must bear losing your money.
What is money market with example?
The money market includes bank loans, CDs (Certificates of Deposits), and different funds and bills.
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