What is a money market account (MMA)?

How a money market account (MMA) works

Money market accounts, offered by banks and credit unions, operate much like traditional savings options with a few important differences. A money market account (MMA) is insured by the FDIC (banks) or NCUA (credit unions) up to $100,000, just as are other savings accounts. The differences are few, but significant. Here are the primary MMA features than differ from traditional savings accounts.

• There are typically minimum balance requirements to open a MMA. Often a minimum deposit of from $1,000-$2,500 is needed to open a MMA and your balance is not permitted to fall below the account minimum.
• Money market accounts usually pay higher interest rates than classic savings accounts. These higher rates are a reflection of the minimum balance requirements and certain federally mandated money market account restrictions (see below).
• Only three to six withdrawals per month are permitted. This account is not designed to serve as a transaction vehicle. It is structured to pay you higher savings account interest while still providing some access to your money.
• You are allowed to write up to three checks per month to allow for remote payment of some obligations or investments.

Money market accounts offered by financial institutions should not be confused with money market mutual fund accounts (MMMFA) available through investment companies. There is no federal insurance available from an investment firm. In addition, instead of a form of savings account, these accounts are really short-term investments in equities (stocks), of which you own a percentage.