Money Market Account
A money market account (MMA) is a type of deposit account offered by banks and credit unions that typically earns a higher interest rate than a regular savings account while still providing limited check-writing and debit card access. It combines features of both savings and checking accounts.
Money Market Account Definition
A money market account (MMA) is a type of deposit account offered by banks and credit unions that typically earns a higher interest rate than a regular savings account while still providing limited check-writing and debit card access. It combines features of both savings and checking accounts.
Money Market Account in Practice — Example
Your business has $75,000 in reserves that you want to keep liquid but also earn interest on. You move the funds into a money market account paying 1.75% APY. Over a year, that earns about $1,312 in interest — money you wouldn't have earned sitting in a regular checking account. You still have access to the funds when needed, with up to six withdrawals per month.
Why Money Market Account Matters for Your Business
Every business should have an operating reserve — typically 3–6 months of expenses — and a money market account is one of the best places to park it. You earn meaningful interest without sacrificing quick access to your cash.
The key advantage over regular savings accounts is the higher interest rate, which is possible because banks invest MMA deposits in low-risk, short-term securities. The key advantage over CDs or time deposits is liquidity — you can access your money without early withdrawal penalties.
For businesses that maintain large cash reserves (for upcoming tax payments, seasonal inventory purchases, or emergency funds), MMAs represent free money. The interest earned on idle cash can cover a few months of banking fees, office supplies, or SaaS subscriptions.
How Money Market Accounts Work
| Feature | Money Market Account | Savings Account | Checking Account |
|---|---|---|---|
| Interest rate | Higher | Moderate | Low/none |
| Check writing | Limited | No | Unlimited |
| Debit card | Sometimes | No | Yes |
| Withdrawal limits | ~6/month | ~6/month | Unlimited |
| FDIC insured | Yes ($250K) | Yes ($250K) | Yes ($250K) |
| Minimum balance | Often $1,000–$25,000 | Often lower | Varies |
Interest rates on MMAs are variable and tied to market conditions. When the Fed raises rates, MMA rates typically follow.
Money Market Account vs Money Market Fund
A money market account is a bank deposit product — FDIC insured and guaranteed up to $250,000. A money market fund is an investment product — not FDIC insured, with a small risk of loss. They sound similar but have very different risk profiles. For business reserves you can't afford to lose, stick with FDIC-insured money market accounts.
FAQ
Q: Are money market accounts FDIC insured?
A: Yes, money market accounts at FDIC-insured banks are protected up to $250,000 per depositor per bank. Money market mutual funds are not.
Q: What's the catch with money market accounts?
A: Higher minimum balance requirements (often $1,000–$25,000), limited withdrawals per month, and variable interest rates. If your balance drops below the minimum, you may lose the higher rate or face fees.
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