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. Call Deposit Account

    A bank account for investment funds that offers the advantages ...
  5. Super NOW Account

    An account created in 1982 that offers a higher interest rate ...
  6. Checking Account

    A checking account is a deposit account at a financial institution ...
Related Articles
  1. Personal Finance

    4 Savings Accounts for Investors

    Curious about the best saving accounts and which ones suit investors?
  2. Personal Finance

    Handling High-Yield Savings Accounts

    Is this the savings route for you? Read on to find out what these accounts have to offer.
  3. Personal Finance

    Find the Best Savings Account Rates

    You know how to spot the highest interest rate, but how do you really get the best deal on savings accounts?
  4. Personal Finance

    The 5 Best Alternatives to Bank Saving Accounts

    Find out about some of the most profitable available alternatives to depositing money in a traditional bank passbook savings account.
  5. Personal Finance

    Get the Best Savings Interest Rates For You

    How do you choose between market deposit accounts, CDs and traditional savings accounts?
  6. Personal Finance

    The 7 Best Places to Put Your Savings

    You work hard to put your money away for the future, but where should you keep it?
  7. 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.
  8. Investing

    What is a Demand Deposit?

    A demand deposit is any type of account where the money in the account may be withdrawn at any time without prior notice to the financial institution.
  9. Personal Finance

    Where To Put Your Cash: Call Deposit Vs Time Deposit Accounts

    Time deposit accounts and call deposit accounts allow customers to earn higher interest in exchange for less access to their cash.
  10. Personal Finance

    Bag The Best Bank Account

    Take advantage of the deals banks offer, and find the right account for your financial situation.
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. 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 >>
  3. 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 >>
  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. Why would you keep funds in a money market account and not a savings account?

    Read about the differences between money market accounts and savings accounts, and see why a depositor would elect a money ... Read Answer >>
Hot Definitions
  1. Investing

    The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit.
  2. Stagflation

    A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, ...
  3. Notional Value

    The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets ...
  4. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
Trading Center