People are always enticed investing in money market savings account literally because they pay you high money market interest rates which in turn yield high. Apart from high money market account rates, there are decreased level of transactions along with safety as well as guarantee.

Money market savings account

money market interest rates

These savings accounts are just phenomenal because they yield you with best return on investments. The money market interest rates vary from one country to the other depending on the economical condition. These accounts are basically offered by banks, credit unions and other huge financial institutions. The money can be saved for a time period of 1 year or even more. Though there are advantages of using theses money market account, there are drawbacks as swell. Let us look about the advantages as well as the disadvantages in detail:

  • Security: These accounts are basically insured by FDIC (Federal Deposit Insurance Corporation) and hence they are basically secured. Even if the bank fails to secure your savings, FDIC definitely will and hence the depositors will not have to worry about losing their cash. The risk factor is completely low when compared with other investment plans like stock market and mutual funds.
  • High minimum balance: The main drawback of using these accounts is none other than having a high minimum balance. The account holder or the depositor is asked to have at least a minimum balance of $5000. Even if an account holder fails to maintain the minimum balance, then the financial institution might incur a penalty.
  • Maintenance costs: If you are on the safer side in sustaining the specified minimum balance, then there wouldn’t be any fees charged on you but once you drop down from the minimum balance, then you will have to pay them with certain cost. There are certain banks which put up separate charge for maintenance every year. Though it is common for all the banks, the charges differ from one bank to the other, thus look for the ones that charges less.
  • Limited transactions: These accounts will generally ask you to make transactions only for a specified number of times in a month. Even if you exceed the quantity of transactions in withdrawing funds, then you will have to pay the financial institution a penalty.
  • Liquidity: Compared to other accounts, these possess high liquidity because they are easily accessible. They are completely flexible but the drawback is that they are not as liquid as the checking account. In these money market accounts, there are restrictions in the usage of checks.
  • Yields: Since they are completely insured by the FDIC and as well as offer high interest rate, the yields are also high. The more cash you drop in the account, more will be the yield. Talking about the risk, they are less when compared to the other investment plans.

Before choosing these accounts, you will have to research a lot of financial institutions offering these accounts. You need to look into the money market account rates offered by banks and other financial institutions. You will have to shortlist few of the service providers and use a comparison tool to check for the best interest rate offered by the service provider. You need to check if the account will suit all your needs. You need to check on every factor associated with the financial institution as well as the bank.


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