Money Market Account

Money Market Account

An account at a bank that pays a higher than normal (relative to other bank accounts) interest rate in exchange for a high minimum balance and a restriction on how many transactions may take place on the account in a given month. For example, a bank may require a minimum balance of $1,000 and require that no more than 10 transactions occur on that account each month. In exchange, it offers an interest rate competitive with the money market funds interest rate.

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Money market account. Bank money market accounts normally pay interest at rates comparable to those offered by money market mutual funds or money market separate accounts offered under a variable annuity contract.

One appeal of money market accounts is that they have the added safety of Federal Deposit Insurance Corporation (FDIC) protection, up to the limit per depositor and account type.

One drawback may be that some banks reduce the interest they pay or impose fees if your balance falls below a specific amount.

Money market accounts may offer check writing and cash transfer privileges, although there are usually limits on the number of withdrawals or transfers you can make each month.

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Money Market Account

What Does Money Market Account Mean?

A savings account that pays interest on deposited monies. Also known by the acronym MMDA, which stands for “money market demand account” or “money market deposit account.”

Investopedia explains Money Market Account

Many money market accounts place restrictions on the amount of transactions an investor can make in a month (e.g., five or less). Furthermore, the investor usually has to maintain a certain balance in the account to receive a higher rate of interest. Some banks require minimum initial deposits, and others require minimum account balances. Money markets are similar to savings accounts except that they frequently pay higher interest rates in return for adhering to minimum account requirements.

Related Terms:
• Annual Percentage Yield—APY
• Cash and Cash Equivalents—CCE
• Interest
• Liquidity
• Money Market