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. Checking Account

    A checking account is a deposit account at a financial institution ...
  6. Deposit Interest Rate

    The interest rate paid by financial institutions to deposit account ...
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

    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?
  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. Investing

    A Guide to Bank Accounts

    Find out which type of bank account suits your specific needs.
  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. 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. Retirement

    Introduction To Retirement Money Market Accounts

    Money market funds are used in retirement plans and accounts because they are liquid, stable and pay competitive rates of interest.
  10. Personal Finance

    5 Mistakes You're Making With Money Market Accounts

    Money market accounts can be helpful "parking spots" for investors. Here are five key things to keep in mind when opening an account.
RELATED FAQS
  1. 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 >>
  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. What economic factors affect savings account rates?

    Find out how supply, demand and central bank policy all affect savings account rates offered by banks for extra deposits ... Read Answer >>
Hot Definitions
  1. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  4. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  5. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
  6. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are considered socially conscious because of the nature of the ...
Trading Center