how money market accounts mmas work
money market accounts are financial products that are offered to customers at traditional and online banks and at credit unions they give account holders some of the key benefits of a savings account while providing them with the features of a checking account including banks often require a minimum initial deposit in order to open an mma and balances must be maintained over a certain threshold while they are active banks may impose a service charge if the balance falls below that minimum amount money market accounts are suited for individuals who want to earn more interest than they would with a savings account with short term goals in mind as such an mma may be a good idea if you re saving up for a specific purchase such as a vacation the down payment for a car or for a rainy day or emergency fund they are not intended for long term purposes like retirement history of money market accounts mmas until the early 1980s the federal government placed a cap or limit on the amount of interest that banks and credit unions could offer customers on their savings accounts 1many institutions gave out small appliances such as toasters and waffle irons and other incentives to attract deposits because they couldn t compete with money market mutual funds when it came to interest rates introduced in the 1970s money market mutual funds are sold by brokerages and mutual fund companies 2 under pressure from the banking industry congress passed the garn st germain depository institutions act in 1982 this new law allowed banks and credit unions to offer money market accounts that paid a money market rate which was higher than the previous capped rate 1advantages and disadvantages of money market accounts mmas there are advantages and disadvantages to having a money market account especially when you compare them to other types of accounts their advantages include higher interest rates check writing and debit card privileges banks and credit unions generally require customers to deposit a certain amount of money to open an account and to keep their account balance above a certain level many impose monthly fees if the balance falls below the minimum these accounts also provide federal insurance protection accounts held at banks are insured by the federal deposit insurance corporation fdic while those held at credit unions are insured by national credit union administration ncua the fdic and ncua cover certain types of accounts including mmas up to 250 000 per depositor per bank multiple insurable accounts at the same bank checking savings certificate of deposit count toward the 250 000 insurance limit joint accounts are insured for 500 000 345potential disadvantages include limited transactions fees and minimum balance requirements higher interest ratescheck writing privilegesdebit cardsinsurance protectionlimited transactionsfeesminimum balance requirementfor depositors who want to insure more than 250 000 the easiest way to accomplish that is to open accounts at more than one bank or credit union money market accounts mmas vs savings accountsone of the attractions of money market accounts is that they offer higher interest rates than savings accounts for example the average interest rate for an mma in may 2022 was 0 08 while the average savings account paid about 0 07 6