Money Market Account Definition: Its Features and Benefits

Learn what is money market account definition and how it works to produce the desired results for the bank and its customers today.

What is Money Market Account Definition

Unlike the different types of bank and credit union accounts, the money market mutual funds offered by brokerage firms and mutual funds companies are not insured by either the FDIC or NCUA. Money market accounts are able to offer higher interest rates because they are allowed to invest in certificates of deposit (CDs), government securities, and commercial paper, something savings accounts cannot do.


Many banks also offer higher-yielding checking accounts, or checking accounts with higher interest rates, that can pay better rates than money market accounts, but they have greater restrictions. If you need the flexibility to write multiple checks or do multiple online bill payments, you might consider a high-interest checking account. Account holders can write checks and make withdrawals online, via mobile apps, or using an ATM card.

If you need to dip into savings for any reason, you can do so through an electronic transfer, a check, or an ATM withdrawal, depending on what options your bank offers. While some money market deposit accounts may offer a higher interest rate to savers, others might offer a rate that is similar to the APR you would earn from a standard savings account. Otherwise, a savings account with a comparable rate of interest would work equally well – and the slightly lower liquidity might prevent you from drawing down funds when you really do not need them.

This kind of account earns interest on the funds you put in, like a savings account

Just like a regular savings account, funds in your money market account are insured, so long as you are doing business with a bank insured by the Federal Deposit Insurance Corporation, or a credit union insured by the National Credit Union Association, which is an agency under the Federal Deposit Insurance Corporation. As long as you are banking with a FDIC-insured institution (or a credit union insured by the NCUA), the balances in your money market account, combined with balances of any other bank accounts with the same institution, are insured for a maximum of $250,000 per account for an individual or $500,000 per joint account ($250,000 per account holder).

Account is Insured

Each type of account is insured for up to $250,000 per depositor, each insured financial institution. A money market account typically requires a higher minimum deposit, both offer comparable interest rates, and both generally have similar limits on how many uncomfortable withdrawals or transfers you are allowed to make. There are some key differences between money market accounts and traditional savings accounts as well, including higher minimum deposit requirements and better interest rates for MMAs.

In addition to providing funds to take out a loan from the bank, as with a typical savings account, money market funds may be used in lower-risk investments such as CDs and bonds. It might feel like a hassle to keep accounts at more than one location, but you could save much more by trying out a different institution. Keep in mind, you do not need to commit to just one type of account to get the features you want.

Keep in mind that these types of accounts can have minimum monthly balance requirements and maintenance fees. Any time you are considering opening a new type of bank account, it is important to think about any potential drawbacks.

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