A money market savings account, popularly known in its short form – MMA, is a type of savings account which earns a higher amount of interest when compared to basic and ordinary savings accounts.
How does interest work with a money market savings account?
The interest in an MMA is compounded either on a daily, weekly or monthly basis. The interest is paid on a monthly or quarterly basis.
Benefits of an MMA
- The FDIC Insurance: The Federal Deposit Insurance Corporation (FDIC) allows insurance on the deposits and interest accrued maximum by the law. The FDIC protects the money you put into the MMA, and this feature usually is not available in standard savings accounts.
- Interest rates: This is the best benefit of an MMA. The interest rates are much higher when compared to normal savings accounts. This acts as leverage to convince people all around to save money.
- Checks and Debit cards: It is a known fact that normal savings accounts do not allow one to access money easily through checks or debit cards. This hindrance is removed through MMAs. MMAs allow the account holder to write checks and use debit cards to make payments.
Disadvantages of an MMA
- Balance requirement: A money market savings account requires a high minimum balance amount. If the minimum amount specified by the bank is not in the account, then such an account will be levied a fine.
- Withdrawals and transfers: Majority of money market savings accounts allow only a limited number of withdrawals and transfers every month. This acts as a problem to account holders who may want to withdraw money during an emergency but may not be allowed to because it exceeds the limit.
- Interest rate fluctuation: A money market account of any kind does not come with a fixed rate of interest. The interest rates vary as per market conditions.
- Fees: Banks providing money market accounts of any type charge fees for account maintenance, transactions and all other financial services available.