Money Market Account


DEFINITION of 'Money Market Account'

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.


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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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