A money market account (MMA) or money market deposit account (MMDA) is a type of deposit account offered by banks and credit unions that pays interest based on current interest rates in the money markets. They are similar to savings accounts, but they offer some checking account features as well. Money market accounts generally pay higher interest rates than regular savings accounts, and they may come with debit cards and limited check-writing privileges. However, they may also come with restrictions that make them less flexible than a regular checking account, such as a limited number of withdrawals permitted each statement period. Money market accounts are regulated under terms similar to ordinary savings accounts and are insured by the FDIC (unlike money market funds) .
Pros of money market accounts include:
- Competitive interest rates that are frequently tiered based on the accounts balance.
- Safety, as they are FDIC-insured.
- They offer some of the benefits of both savings and checking accounts.
Cons of money market accounts include:
- They may require higher minimum balances to avoid monthly fees and to earn interest.
- They may come with restrictions that make them less flexible than a regular checking account, such as a limited number of withdrawals permitted each statement period.
- The interest rates paid may be lower than the long-term return you'd receive from investing in index funds or similar types of investments.
Overall, money market accounts are suited for short-term goals rather than long-term financial planning.
