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What is a call deposit account?
A money market account (MMA) is a savings account that may also have a debit card and check-writing access. These accounts typically limit the number of purchases and transfers to six per month. ATM withdrawals are usually unlimited.
Money market accounts have traditionally offered higher interest rates than regular savings accounts. But now the price is about the same. However, many MMAs have higher minimum deposit or balance requirements than regular savings accounts.
Deposits are insured by the Federal Deposit Insurance Corporation. Get insured with your bank and the National Credit Union Administration. In the event of a financial institution failure, your funds are protected up to $250,000 per depositor.
Pros and Cons of Money Market Accounts
Advantages
- You can earn interest: Currently, the best money market accounts pay around 3% to 4% annualized return (APY), a significant increase from a year ago.
- Deposits are insured: Funds are insured up to $250,000 per bank or credit union account holder.
- Cash Available: Your account usually comes with a debit card and/or physical check.
Disadvantages
- Large minimum deposit requirements: Money market accounts may require a larger deposit than traditional savings accounts to open or earn the highest APY.
- Lower yield than other bank products: CDs can offer more competitive yields. Investors who are willing to take on more risk can also earn higher returns from stocks and bonds.
- Withdrawal restrictions: While you can withdraw funds from your money market account by writing a check or using a debit card, these accounts are not primarily used for trading, so there are some restrictions.
How a money market account (MMA) works.
Money market accounts are financial products offered to customers by brick-and-mortar banks, online banks, and credit unions. They offer account holders some of the key benefits of a savings account while giving them the features of a checking account, including:
- Interest: Like savings accounts, MMAs allow account holders to earn interest on their balances. The interest rates offered are usually higher than those on traditional savings accounts. However, interest rates tend to be floating, meaning that it fluctuates as market conditions rise and fall.
- Debit Card: Some banks include a debit card with the account, allowing the owner to deposit, withdraw, and transfer money using automated teller machines (ATMs).
- Check Writing: In addition to debit cards, customers can also write checks against their account balance.
Banks usually require a minimum initial deposit to open an MMA, and the balance must remain above a certain threshold while active. If the balance falls below this minimum amount, the bank may charge a service fee.
Money market accounts are for those looking to earn more interest than savings accounts with short-term goals. So if you’re saving for a specific purchase, for example, MMA might be a good idea. B. Vacation, car down payment or rainy day or emergency fund. They are not used for long-term purposes such as retirement.
History of the Money Market Account (MMA)
Until the early 1980s, the federal government set a cap, or limit, on the amount of interest banks and credit unions could offer their customers’ savings accounts.
Many institutions offer small appliances such as toasters and waffle irons and other incentives to attract deposits because they cannot compete with money market funds on interest rates.
Introduced in the 1970s, money market mutual funds are marketed by brokers and mutual fund companies. Under pressure from the banking industry, Congress passed the Garn-St. Germain Depository Institutions Act of 1982. The new law allows banks and credit unions to offer money market accounts that pay “money market” rates above the previous cap rate.
