What exactly is a money market account?

[simpleselu]

And how do they work?

Do they all have check-writing privilages?

[mariec99]

A money market account is kind of like a mutual fund except the securities that the funds are invested in are very "safe" things -- like gov't bonds. Some companies do let you have check writing in the accounts. Be very careful though, because some of these accounts are not FDIC insured because they are considered to be securities - not normal bank deposits.

[simpleselu]

Thanks, Marie! I didn't realize they were not FDIC insured...

[Broken Arrow]

To be clear, there is a Money Market Fund (MMF), and a Money Market Savings (MMS).

Money Market Fund is a low risk, low return investment fund that is NOT FDIC insured, but have rarely ever "broke the buck" (or lost money). As the name implies, I believe it is based on currency trading (forex), but I could be wrong. Investment brokerages traditionally offer MMFs.

Money Market Savings is more like a traditional bank Savings account. In fact... I believe it is! The only difference between a MMS and a regular savings account is that financial institutions are willing to pay you more interest in return for a higher minimum balance. MMSes ARE FDIC insured, and naturally, banks traditionally offer MMSes.

Personally, I'm a bit puzzled at this term myself because, as far as I can tell, it's not based on forex. Using the term "Money Market" may simply be a way to brand itself as something that performs similary and competes directly to traditional MMFs, but that too, I'm not entirely sure.

The wrinkle to the traditional MMS model is internet banks. Without the usual upkeep of brick & mortar establishments, some internet banks are able to offer higher interest rates, lower minimum balances, and often times, both. Fortunately, some internet banks have dispensed with the wonky naming scheme and use something else like "eSavings" for example.

On this forum, I believe (and I could be wrong) that Money Market Account is synonymous with Money Market Savings, but despite the slight vagueness with the term, it is MMA that caught on and stuck, rather than MMS. Oh well.

But that's how I understand it anyway.

[gotalkmoney]

A money market account is pretty much a savings account like broken arrow said.

A lot of financial institutions will limit you on tranactions though. Check with your bank for more details..

[Broken Arrow]

Yes, because it's a Savings account, you are generally limited by law to only 6 transactions per month.