Loading the player...

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 Federal Deposit Insurance Corporation (FDIC) insured.

BREAKING DOWN 'Money Market Account'

Money markets are typically able to offer higher annual percentage yields than savings accounts as the vehicles invest in a variety of options from which traditional passbook accounts are restricted. Banking institutions provide access to insured money market deposit accounts (MMDA). MMDA’S offer FDIC backing and the portfolios typically invest in short-term, liquid securities. 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. Money markets pursue investing deposits in vehicles such as certificates of deposit, government securities, and commercial paper that offer higher yields than are generally found in savings accounts.

Money Market Account Fees and Minimums

Money market fund minimums to establish an account generally vary among financial institutions. Online banks such as State Farm Bank offer money market options that require an initial deposit of $100 whereas banks such as Silvergate Bank mandate that a deposit of $10,000 to open an account. Regional retail banks such as PNC Bank only mandate a $1 deposit to establish an account.

State Farm Bank’s money market account requires a minimum balance of $500 to avoid a $10 monthly service fee. Silvergate Bank, by contrast, requires a $50,000 balance to sidestep monthly fees of $50 per month. Both institutions offer check writing privileges on these accounts.

Money Market Rates

Eschewing brick-and-mortar options for an electronic market presence, online banks are able to offer higher rates through reduced operational costs. PNC Bank, with walk-in locations extending from the South to Northeast and into the Midwest, offers a money market rate of 0.13% on balances between $50,000 and $99,000 in the Northeast as of July 7, 2016. Online banks such as Ally Bank, headquartered in Midvale, Utah and possessing no retail branches, establishes a money market rate of 0.85% across all balances. The national average for a bank money market account has an annual percentage yield of 0.11%.

RELATED TERMS
  1. Bank Deposits

    Money placed into a banking institution for safekeeping. Bank ...
  2. Retirement Money Market Account

    A money market account that an individual holds within a retirement ...
  3. Savings Account

    A deposit account held at a bank or other financial institution ...
  4. Super NOW Account

    An account created in 1982 that offers a higher interest rate ...
  5. Call Deposit Account

    A bank account for investment funds that offers the advantages ...
  6. Deposit Interest Rate

    The interest rate paid by financial institutions to deposit account ...
Related Articles
  1. Personal Finance

    Understanding Savings Accounts

    A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
  2. Personal Finance

    Get the Best Savings Interest Rates For You

    How do you choose between market deposit accounts, CDs and traditional savings accounts?
  3. Investing

    Money Market Accounts vs. Savings Accounts

    An interest-bearing account that pays a higher interest rate than a savings account and gives the account holder limited check-writing ability.
  4. Personal Finance

    These Savings Accounts Have the Highest Interest Rates

    Don't expect interest from a bank savings account to make you rich. You can do better, however, than the paltry 0.08% average paid in 2015.
  5. Personal Finance

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.
  6. Small Business

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  7. Personal Finance

    10 Bank Promotions That Pay You To Open An Account

    Find out which banks are running cash promotions this summer.
  8. Managing Wealth

    Money Market Rates: Finding the Best Accounts in 2016

    This helpful rate calculator quickly shows you where to find the highest interest rate on a money market account.
  9. Managing Wealth

    Money Market Rates: Finding the Best Accounts in 2016

    This helpful rate calculator quickly shows you where to find the highest interest rate on a money market account.
RELATED FAQS
  1. How liquid are money market accounts?

    Understand the characteristics that distinguish money market accounts from checking, savings account and money market funds ... Read Answer >>
  2. How safe are money market accounts?

    Learn the difference between a money market account and a money market fund. Both savings vehicles are relatively safe, but ... Read Answer >>
  3. For what types of accounts are demand deposits available?

    Learn about the different types of accounts designated as demand deposit accounts, such as savings accounts and money market ... Read Answer >>
  4. What determines the interest rate in my money market account?

    Placing funds in a money market account may provide a higher interest rate than a savings account due to the underlying securities ... Read Answer >>
  5. What are the requirements for opening a savings account in the United States?

    Understand what information and documentation is necessary to open a savings account within the United States, and learn ... Read Answer >>
Hot Definitions
  1. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
Trading Center