Best Money Market Accounts – Advantages and Disadvantages

Money market accounts are those which are offered by banks, financial institutions and credit unions, for people who wish to put aside their hard earned bucks, as savings. The savings may be kept in these accounts for a period of one year or more. People do not wish to risk their savings and lose their money.

But the money market accounts also have certain advantages and disadvantages. They are:

1. Security:

Normally, all these accounts are insured to the extent of $250,000, with the Federal Deposit Insurance Corporation. In case the financial institution fails, the depositors do not have to face the risk of losing all their money. Deposits in this accounts are hence believed to be the safe one in comparison to mutual funds and stocks.

2. Minimum transaction:

The major disadvantage with these accounts is the maintenance of minimum balance. The minimum balance that a depositor is required to maintain is $5,000 which is on a higher side compared to the usual savings account that requires merely $50.

3. Maintenance fees:

As long as you maintain the minimum required balance, you will not be charged with any fees. If the balance is not maintained and decreases because of number of cheques being presented, then you are sure to be charged with the stipulated fee. The depositors need not pay any fee to the financial institutions for the purpose of their managing your accounts.

4. Liquidity:

These accounts are easily accessible by the depositors. They are highly liquid as compared to the certificate of deposits that usually carry a maturity date. The disadvantageous part is that the money market deposits are not as liquid as your checking account. In the money market deposit accounts, there is a restriction regarding the number of cheques that can be presented and the maximum amount for which cheques can be presented.

5. Rates of return:

Usually, these deposit accounts that are insured with FDIC carry a higher rate of interest. The more your deposit in the account, more will be your interest earnings. But compared to the returns on risky investments like shares and stocks, the return on money market accounts is not that potential which is a disadvantage.

Next Step: Find the best latest rates offered by the banks for Money Market Accounts.