What is a 'Money Market Account Xtra (MMAX)'

Money Market Account Xtra (MMAX) accounts enable depositors to secure Federal Deposit Insurance Company (FDIC) insurance on large deposits that would otherwise exceed the normal insurance limit of $250,000. The MMAX structure allows banks to attract large depositors, including retail, commercial and public entities.

Breaking Down 'Money Market Account Xtra (MMAX)'

MMAX is offered by The Institutional Deposits Corporation (IDC) through its network of participating community banks nationwide to depositors looking for additional FDIC insurance. When a depositor opens an MMAX account, the participating IDC bank uses its relationship with other participating IDC network members to guarantee FDIC insurance for the total account balance up to $5 million. Holders are limited to six withdrawals from their MMAX account monthly. The funds are then distributed into deposit accounts among multiple banks in IDC's deposit network. No more than $250,000 can be deposited in any one bank. The advantage of MMAX accounts is that instead of being covered only up to the FDIC deposit insurance amount, the individual can have more funds insured. For example, if a depositor had $500,000, he could use the MMAX structure to have two banks each hold $250,000; thus, the FDIC would insure the full $500,000.

IDC provides investing, funding, and fee income solutions through its money market deposit programs. It offers banks with excess funds an alternative to the fed funds sold option, increasing their yield without sacrificing liquidity. Banks that in the need of funds can purchase deposits that adjust with their prime based assets. MMAX allows banks to offer expanded FDIC insurance on money market deposits to their retail customers. IDC was formed to provide the banking industry with a method for enhancing FDIC insurance coverage. This coverage is created through a network of well capitalized banks and thrifts.

Money Market Accounts Explained

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 offers the account holder benefits typical of both savings and checking accounts. Money market accounts are FDIC insured but require a higher balance than a savings account. They are able to offer a higher interest rate by requiring the higher minimum balance as well as restricting the number of withdrawals. This makes them less liquid than a checking account, but more liquid than bonds. Money markets accounts are invested in deposits certificates of deposit, government securities, and commercial paper that offer higher yields than generally found in savings accounts.

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