A money market account is a type of savings account offered by banks and credit unions just like regular savings accounts. The difference is that they usually pay higher interest, have higher minimum balance requirements (sometimes $1000-$2500), and only allow three to six withdrawals per month. Another difference is that, similar to a checking account, many money market accounts will let you write up to three checks each month.
With bank accounts, the money in a money market account is insured by the Federal Deposit Insurance Corporation (FDIC), which means that even if the bank or credit union goes out of business, your money will still be there. The FDIC is an independent agency of the federal government that was created in 1933 because thousands of banks had failed in the 1920s and early 1930s. Not a single person has lost money in a bank or credit union that was insured by the FDIC since it began. With credit unions, the money in a money market account is insured by the National Credit Union Administration (NCUA), a federal agency.
A Money Market Account is also known as a money market deposit account or a money market demand account (MMDA). Again, it is essentially a low-risk savings account. The interest it pays fluctuates with the prime rate. This is because financial institutions use cash from money market accounts for other investments and to lend to other people. They pay more interest on money market accounts when they are receiving more interest on money they are loaning to other people.
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Overview of Money Market Accounts - *******************
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