Money market accounts often have higher minimum investments and balances than regular savings accounts but offer higher returns. They also allow account holders to write a limited number of checks or make limited debit card purchases from the account each month (up to six total).
If you don't have a lot of money to start with, a savings account makes sense because it's possible to find accounts that don't require minimums. If you want to earn a higher APY and you can meet a higher account minimum, a money market account is a good choice.
Money market accounts are insured by the Federal Deposit Insurance Corp. (at banks) and the National Credit Union Administration (at credit unions), so you won't lose your deposits even if the financial institution goes out of business.
Money market accounts usually require a higher minimum balance than regular savings accounts, sometimes as much as $10,000, according to Bankrate.com. You can be hit with a hefty fee of as much as $25 if your balance falls below the minimum. You can incur a penalty for writing too many checks.
A money market account is a type of savings deposit account that can be found at banks and credit unions. These high-rate money market accounts may pay a higher interest rate than traditional savings accounts, but their minimum deposit and balance requirements may be higher.
That's because they can invest in low-risk, stable funds like Treasury bonds (T-bonds) and typically pay higher rates of interest than a savings account. While the returns may not be not much, money market accounts are still a pretty good choice during times of uncertainty.
Money markets provide temporary safety during a recession with short-term, low-risk securities.
The U.S. Federal Reserve and terrible disasters are the two main causes of decreases in the interest rates on money market investments. ... Disasters lower short-term interest rates because investors take their money out of other investments, such as stock, and put it into the safest investments they can find.
Vanguard Federal Money Market Fund (VMFXX)
It is one of the most conservative investments offered by Vanguard, as U.S. government securities are considered low-risk investments. VMFXX requires a $3,000 minimum investment and has a 0.11% expense ratio. It had an average one-year return of 0.2%.
Money Market Deposit Accounts
These are bank accounts that invest in very short-term corporate loans and CDs. Pros: These accounts pay higher interest than traditional savings accounts. Your money is FDIC-insured. Cons: You're limited to writing no more than three checks a month.
Depositors tend to choose money market accounts because they offer higher interest rates than savings accounts. While the difference in earned interest can be small, it might be enough to offset liquidity constraints if depositors are unlikely to need quick access to their cash.
Money market deposit accounts are a type of savings account offered by banks and credit unions. The Internal Revenue Service requires account holders to pay tax on interest earned on money market accounts and other types of interest-paying deposit accounts. ... You use the 1099-INT form to complete your taxes.
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