What is a Money Market Account?

2 min read
Oct 23, 2023 3:16:05 PM

Money market accounts have been around for decades and offer an option for investors looking for a higher rate of interest over a longer time. Money market accounts can be a beneficial and popular offering for employees.

Here is what you need to know about money market accounts.

What Is a Money Market Account?

A money market account is a type of bank account that combines the features of checking and savings accounts. Obtainable through banks or credit unions, money market accounts typically pay higher interest rates than traditional savings accounts and may offer check-writing and debit card privileges. They usually require a minimum balance and have limited transactions, but typically offer a higher rate of interest over a longer period of time.

Like other deposit accounts, money market accounts are insured by the FDIC or NCUA.

Money Market Account vs. Savings Account

The main difference between a savings account and a money market account is that you will have the opportunity to invest in securities and certificates of deposit so there is a greater long-term advantage.

Benefits of a Money Market Account

While there are also fees required, the variable interest rate that money market accounts earn makes them an attractive investment for people with cash to put away for a while.

Other advantages of a money market account include high yields, liquidity and federal insurance for your funds, and the ability to pay bills, write checks, and make debit card purchases. Often times money market accounts are used for emergency funds or big planned expenses. 

Money Market Account Requirements and Restrictions

It is important to understand the requirements and restrictions of your money market account before deciding to open one.

Your money will be federally insured, but you will have to decide how often you need to use the account. There is usually a limit to the number of transactions allowed each month.

Check writing and debit cards are available on many money market accounts, but again there may be monthly limits. That’s why it is important to understand every facet of your account before deciding if it is right for you.

Money market accounts are also subject to inflation so doing some research on the current financial climate will help you know when it is right to open an account.

Set up a Money Market Account

If you are looking to offer money market accounts as a benefit to employees a payroll company may be able to help. For instance, using modern payroll software can include ACH deposits which can be used to deposit money into a money market account. 

To learn more, contact us today.

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