What Are Money Market Account Advantages And Disadvantages?

A money market account, also known as money market deposit account, is insured by Federal Deposit Insurance Corporation. This type of account gives comparatively high-interest rates and offers cash withdrawal privileges. Astonishingly, this account type gives both savings and checking tools at much higher returns than normal savings and checking accounts. You can opt for a money market account at banks or credit unions.

The reason money markets offer higher annual percentage returns than the savings accounts is that they invest in an array of options which are restricted in passbook accounts. Money market accounts have a backing of FDIC and offer high-interest rates. The vehicles on investments opted by money market are certificates of deposit, government securities and commercial paper which give higher returns.

If you are looking to put away some funds for emergency, money market account can be a brilliant option. Similar to a basic savings account, it will be away from your everyday use. And with higher returns, you can expect your funds to grow faster. This enables you to write off a check to handle the emergency that may arise.

Yes, the returns are high, but it would be imprudent to expect fast gains. It’s due to the fact that the rates are currently low all across the board on federally insured accounts, counting checking, savings and MMAs. It’s wise to be reasonable with your fund’s growth. Therefore, one should know all pros and cons. Here are the Money Market Account Advantages And Disadvantages.

What Are Money Market Account Advantages And Disadvantages?

Money Market Accounts Advantages And Disadvantages


Rate of Interest higher than other

Taking the name of any type of bank account – whether normal savings account or passbook savings account, money market account pays higher interest rates than all of them, given you maintain a minimum balance. In order to make the money market account accumulate more profit, the interest is compounded and credited monthly.

Lower Risks

Money Market accounts are insured by FDIC for up to $250,000 limit per account. This makes money market accounts low-risk and safe investments attracting investors as there is safety against loss of deposit.

Easy Accessibility

Money market accounts are accessible through transfers, checks and ATMs by their account holders. However, there is a limit to the number of transactions done and transfers made per month.

Money market account


It requires high balance

Commerce Bank’s Premium Money Market Account terms to maintain an average daily balance of $5,000. Bank of America requires a person to keep a minimum balance of $2,500 in their money market account. While a lot of banks ask to maintain a minimum balance, there are some which do not require any minimum balance.

Bank limits the number of transaction and transfers made.

Under the federal banking regulations, a number of banks across the country apply a restriction on the number of monthly transactions and transfers. The National Alliance Bank, for example, allows only six withdrawals per statement cycle. Commerce Bank, too, allows not more than six transfers or withdrawals in a month. This might not seem to be a problem otherwise but in a case of emergency, it can cause complications.

Swings in Interest Rate and extra fees.

Interest rates applied on a money market account are of variable nature. These interest rate changes due to external fluctuation in general market interest rates. Above this, banks and credit unions offering money market accounts charge fees to maintain accounts and for transactions and various financial services. All these factors somewhat lower the overall value of money market account.

Wells Fargo provide excellent opportunities to its customers. You can avail them by opening an account there. However, you need to know your Wells Fargo routing number.

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