What is a Money Market Account(MMA)? Latest details.

A money market account (MMA) is offered by most banks and some credit unions and, in most cases, comes with slightly higher interest than a regular savings account. On the other hand, an MMA often requires a higher minimum balance and may limit the number of times the holder can access the money or use the funds through check. This paper discusses the fundamentals of money market accounts, compares them with traditional savings accounts, and explains their functions.

What is a Money Market Account(MMA)?

A money market account is a deposit account offered by banks and financial institutions in exchange for interest-based on money-market interest rates. This usually means that MMA delivers an interest rate that is greater than a standard savings account, thus provides more lure to savers in order to make a profit on the quantities of money they have saved. But this usually has a higher minimum to open and maintain, which, therefore, restricts the number of transactions or withdrawals you can make in a month.

What is a Money Market Savings Account?

The name “money market savings account” is at best misleading and really confusing, because it mixes features of money market accounts with features of traditional savings accounts. In other simple words, “money market savings account” combines elements of both types of accounts in order to emphasize the nature of the account as a tool for saving with possible higher yields. As with any MMA, it marries the earning power of money market investments with the accessibility of a savings account, allowing a fixed number of check-writing abilities and transactions — not a common allowance in standard savings accounts.

SEE STORIES>> 15 MOST LUXURIOUS NEIGHNOURHOODS IN USA.

How Does a Money Market Account Work?

What happens with a money market account is that it invests the money a depositor has placed into the account in short-term, liquid securities such as treasury bills and commercial paper. Returns on such investments are part of the interest your MMA makes. A money market account brings a fluctuating interest rate with the market, though it often remains higher than a regular saving account. In the case of a savings account, financial institutions may limit you to a number of transactions made in a month without paying for each of those services. They will further encourage you to hold a balance minimum to qualify for the interest rate offered and also waive you from paying monthly fees.

Example Let’s consider an example to illustrate how a money market account works:

Suppose you open an MMA with a $5,000 deposit and an annual percentage yield (APY) of 1.5%.

The account requires a minimum balance of $5,000 to maintain this APY and limits you to six transactions per month. If you kept a balance of $5,000 for one year without performing any transaction that would lower the amount to an effective level below the minimum, then you would be at least $75 ahead in terms of accrued interest over the one-year period, minus any potential fees. In fact, if that $5,000 was deposited in a traditional savings account with the same rate but a much lower APY of 0.5%, that account would only pay the person about $25 in interest under these same terms.