Advantages and Disadvantages of Money Market Accounts

Money market accounts pay rates like savings accounts and have some checking features. Our topic is all about the Advantages and Disadvantages of Money Market Accounts.

What is a Money Market Account?

 A money market account is a deposit account provided by online banks, traditional banks, and credit unions. It generally comes with a debit card or checks and permits a limited amount of transactions each month. Typically, money market accounts also provide higher profits rates than regular savings accounts. But these days, rates are similar. And money markets frequently have a higher minimum balance or deposit requirements than savings accounts, so contrast your options before choosing one.

Money market accounts are insured by the National Credit Union Administration (at credit unions) and the (FDIC) Federal Deposit Insurance Corp. (at banks), so you will not lose your deposits. At the same time, the financial institution goes out of business like Zintego.com.

What are the Advantages and Disadvantages of Money Market Accounts? 

Advantages of Money Market Account

Money market accounts can provide some of the same advantages as checking accounts, savings accounts, or even certificates of deposit. The significant advantages of a money market account include:

• Debit or ATM card

Much like check-writing advantages, not all money market accounts provide an ATM or debit card. If you have a high-yield account, you may find your choices for valve the cash confined to an account-to-account move from the money market to checking. When both accounts are accommodating with one bank, transfers can happen immediately. If the checking account and money market are with separate institutions, you can look for at least one business day hold up and maybe longer.

• Flexibility

Depositing funds to a money market account between linked accounts can be suitable if you have many accounts at the same bank. Having an ATM or linked debits and writing checks can also make things like funding significant expenses, paying or covering an emergency easier and less complicated. Money market account can also be utilized to fund many saving goals for the short and long term. 

• FDIC insurance

The independent FDIC assures money market accounts up to the $250,000 limit per account, making them safe investments and low-risk. This makes the account renowned with investors as it secures them against loss of deposit. Since the Federal Deposit Insurance Corp’s creation, not a single person has lost money in one of its assured financial institutions. The National Credit Union Administration will secure your deposits if your money market account is with a credit union.

• Easy to access

With no maturity date, one of the significant advantages of a money market account is its liquidity. This could be useful if you desire to set up an account that earns interest and where the cash is acquired quickly, like an emergency fund or, if you are lucky, a splurge fund. The benefits of money market accounts make a difference when you are required to tap into your funds to pay for that unpredicted auto repair or a spontaneous weekend getaway. You can generally write a check, transfer money online, or withdraw from an ATM in these cases. It is essential to know that all money market accounts come with transaction limitations, so check in with your financial institution to ensure you understand your monthly limits. 

Disadvantages of Money Market Account

• Low-Interest Rate

In contrast to other investments, money market accounts pay a low-interest rate. While the long-term average goes back for the stock market is around 10 percent every year, money markets and other so-called “cash equivalents” have an average yearly return of closer to 6 percent. Over time, that massive discrepancy in earning potential will get you far less money than you could have earned from bonds or stocks.

• Limited withdrawals or transactions per month

As mentioned above, savings account — and money market account — are limited to 6 total withdrawals every month. Checks are written, and funds are moving between your accounts online or over the phone count as pre-authorized bill payments set up as automatic transfers. These rules are set by the Federal Reserve a Rule D. If you eclipse this total, you will face punishment for each deal over the limit. For example, Ally charges $10 per additional deal and will close a money market account if the limit is often passed.

It is essential to note separate banks can set their own rules concerning the 6 transaction rule and may charge for debit card strikes over a total of 6. Always view strategy before starting a money market. It only takes one $10 fee to wipe out months of interest earnings on a low-balance account.

• Fees

It’s always best to know the fees the bank may charge with any bank account. For money market accounts, banks might charge monthly maintenance fees for merely having the account. While it may be possible to renounce the fee by direct deposit requirements or to meet daily balance, not every bank provides a work-around for permitting the fee. The higher the price, the more it can ruin the interest your savings earn each month.

Conclusion

A money market account is a good step up from a conventional savings account. When you start to seriously grow a saving practice and want to see your money earn more money for you, it is hard to get the profits of compound interest. 

Read more about : Advantages and Disadvantages of a Savings Account