Money Market Account

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What is a 'Money Market Account'

A money market account is an interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the account holder with limited check-writing ability. A money market account thus offers the account holder benefits typical of both savings and checking accounts. This type of account is likely to require a higher balance than a savings account, and is FDIC insured.

BREAKING DOWN '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.

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