Understanding a Money Market Account
photo credits to whatisamoneymarketaccount.org
Most people who have a lot of money in the bank are often encouraged by their bankers to invest in a money market account, or an MMA. Bankers offer this type of account primarily because of the high interest rate that it offers clients.
An MMA or MMDA, as it is sometimes called, is a type of deposit account that has the advantage of being invested in corporate or government securities. The interest is paid to the depositor based on the actual interest rates in the currency markets. Money market accounts have higher rates, as compared to other types of deposit accounts. These types of accounts should also have a higher maintaining balance in order to gain interest or prevent the occurrence of monthly fees.
It should be noted that a money market account is different from a “money market fund.” The latter is an investment strategy offered by brokerage firms and not by banks. There may be some similarities between the two; however, these investment strategies are not related to each other.
In the US, a money market account is still a deposit account, one that offers a higher rate of interest and one from which checks can be issued. MMAs, however, are not checking accounts in the legal definition even if checks can be written against the balance. Money market accounts will always be subject to the regulations that govern savings accounts. For instance, a depositor can only make six withdrawals every month. Thus, when a depositor exceeds this limit, fees are usually imposed on the depositor or the money market account could be closed.
