||Money Market Accounts and Funds
In most states, the typical bank offers this
basic lineup of accounts:
- Checking Accounts - some pay interest, some
- Savings Accounts - pay interest and usually
do not limit withdrawals.
- Money Market Accounts - also called Money
Market Deposit Accounts. Pay more interest
than Savings Accounts and limit the frequency
- Certificates of Deposit (CDs) - pay the highest
interest rates. Penalize you with complete
or partial loss of interest for withdrawals
The general rule is, the less
have to your money and the longer
it is left
on deposit with the bank, the
rate of interest you will get.
are some intriguing exceptions.
offer so-called High Value Checking
(or something similar) that actually
more interest than CDs with long
Money Market Accounts at banks
confused with Money Market Funds,
Money Market Mutual Funds. Money
have these qualities:
- Money Market Funds are not FDIC insured.
- Mutual fund companies or brokerage firms,
not banks, offer Money Market Funds.
- There have been rare instances when the net
asset value (NAV) of a Money Market Fund
has dipped below the target of $1.00 per
share. In these cases, investors making withdrawals
lost some principal. This danger is real
- Money Market Funds often allow you to write
checks on the account. There tend to be fewer
restrictions on withdrawals than with bank
Money Market Accounts and often no restrictions
- Some Money Market Funds invest in municipal
securities, making them free from federal
income tax and possibly also from state income
tax as well.
When you shop around for a place
your cash, these are the main
that you must balance against
- Whether your principal is insured
- Access to your money (how, when, and how
- Interest rate
- Convenience of doing business. Internet banking
and investing appeals to many people in this