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. Savings Account

    A deposit account held at a bank or other financial institution ...
  3. Linked Savings Account

    Any type of bank savings account that is linked by account number ...
  4. Available Balance

    Balances in checking or on-demand accounts where there is a delay ...
  5. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
  6. Demand Deposit

    Funds held in an account from which deposited funds can be withdrawn ...
Related Articles
  1. Investing

    Money Market Accounts with the Highest Interest Rates

    Money market savings accounts can offer higher interest rates than regular or even high-yield bank savings accounts – and perks like these.
  2. Personal Finance

    4 Savings Accounts for Investors

    Curious about the best saving accounts and which ones suit investors?
  3. 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.
  4. 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?
  5. Investing

    Demystification Of Bank Accounts

    Find out which type of account suits your specific needs.
  6. Personal Finance

    The 7 Best Places To Put Your Savings

    You work hard to put your money away for the future, but where you should you keep it?
  7. 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.
  8. 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.
  9. 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.
  10. Managing Wealth

    2015's Top Checking Account Promotions

    Open a checking account in 2015 and the bank could give you a cash bonus. Check out these top offers.
RELATED FAQS
  1. Is a money market account the same as a money market fund?

    Discover the differences between money market accounts and money market funds, including minimum balance requirements, withdrawal ... Read Answer >>
  2. How liquid are money market accounts?

    Understand the characteristics that distinguish money market accounts from checking, savings account and money market funds ... 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. What US banks offer the best savings accounts?

    Explore the best savings accounts offered by national banks comparing annual yield and other factors. Learn why the highest-yield ... Read Answer >>
  6. How do you calculate payback period using Excel?

    Understand the various fees that can be assessed on a personal or business checking account, and learn methods to avoid being ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  3. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  4. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  5. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  6. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
Trading Center