Pros and Cons of MMAs

What are some pros and cons of money market accounts?

Money market accounts (MMAs) are a type of savings vehicle that typically offer higher interest rates than traditional savings accounts.

Here are some pros and cons that should help you decide if MMAs are accounts that appeal to you.

Pros include:

• MMAs offer higher interest rates than basic savings accounts.
• Unlike a certificate of deposit (CD), you’re allowed three to six withdrawals (or deposits) per month.
• Unlike a traditional savings account, you’re permitted to write up to three checks per month for remote bill payment or other investment.
• Your MMA has Federal deposit insurance up to $100,000.

Cons typically include:

• You’ll need to deposit a minimum amount of money (typically between $1,000 and $2,500) to open an MMA, and keep at least that amount in the account.
• Transaction restrictions discourage using an MMA like a demand account (e.g. checking account) or a classic savings account that allows unlimited activity.

Interest rates paid on typical MMAs tend to be higher than classic savings accounts but lower than most CDs. The “trade off” is fair because you still have access to your funds without penalty while earning more money than you would with an unlimited activity account. You can normally open these accounts in person or through online banking.

Recommended resource: Compare MMA rates