Money Market Checking Accounts
Choosing money market checking accounts over basic checking may be a smart move for a person looking to earn more interest. In general, a money market account is savings based and offers competitive interest rates. Funds kept in an account of this type accrue interest. The basic premise of this account is that a person is willing to allow the bank, credit union or other financial institution to hang on to their cash for an extended period (3 months to 2 years) in exchange for earning interest at a higher rate. The financial institution can then take these funds and lend them to other people who pay market interest rates to the financial institution. The financial institution earns the difference between what the borrower pays in interest to them and the interest the financial institution pays to the depositor. Many people who choose to invest their cash this way feel that it is well worth the wait. Using the funds to lend to other people may also require that a person wait up to 10 days before assets can be withdrawn, or that the account holder limit the number of transactions they make to no more than a six per month.
Money market accounts are also known as MMDA's or money market demand accounts. Actually any savings or checking account is considered a demand account. What money market checking accounts do for the depositor is that they allow access to liquid cash when absolutely necessary. Yet, each account can continue to generate interest as long as the minimum balance is maintained. Getting an account of this sort is perfect for the person who receives a windfall, settlement, or even a healthy tax return. The extra cash received could be put into such an account and the interest could be used to pay down current indebtedness, pay for an unusually high bill, or to save for rainy day. There may be a minimal fee or no fee at all. Money market checking accounts are just as accessible as a regular checking account through the use of check writing, automated teller machines, electronic debits and automatic monthly transfers. The rate of interest is less than that accrued for a money market savings account, yet it is usually better than for the typical savings account. For example, if a person were to have two savings and two checking accounts at the same financial institution. And one of each of this type of account is a regular account and the other type is an MMDA. For the savings account, the regular savings may have a interest rate of 1.75%, while the money market savings might be 3.85%. By the same token a regular checking account may have a interest rate of .50%, while a money market checking account may be at 1.85%. The highest yields will be for the longest periods of time.
Financial institutions often use money market checking accounts as a tool to bring in more customers. However, these instruments pose a greater risk to the bank than its counterpart; the MMDA savings account. Therefore, financial institutions require a high minimum balance and a limit on the number of transactions a person can make in a given month in order to hedge that risk. There are also some penalties accessed for dipping below the minimum balance and other penalties are assesses for making too many withdrawals from this type of account. Conversely, the perks for keeping the balance high may include free personal or business checks, waivers on maintenance fees, free cashier's checks, overdraft protection, and free money orders. In shorter term money market checking accounts, say three months, a person can earn some interest. For a higher yield, though, a person has to be willing to give up a tad bit of liquidity for six months or more. It is possible to link an MMDA to an existing account. For the depositor, doing this may make it more easy to transfer funds from account to account and otherwise provide overdraft protection. Another benefit to linking one account to another is for the ease of making electronic deposits.
The good news for people who choose to shore up their finances using money market checking accounts is that these accounts are very safe. Since the beginning of the Federal Deposit Insurance Corporation (FDIC) each depositor's funds has been insured up to an amount of $100,000. There has been one increase in that amount to $250,000 per depositor. The depositor's funds are backed by the full faith and credit of the United States government. Since the FDIC was first established, there has been no loss to a depositor of a single penny of FDIC insured funds. Deposit accounts, including checking and savings accounts, MMDAs and certificates of deposit (CDs) are covered by FDIC insurance. Stocks, bonds, annuities or municipal securities, and mutual fund shares, however, are much more risky. They are not considered deposit accounts and therefore do not carry the protection of the FDIC. "And they have gathered together the money that was found in the house of the LORD, and have delivered it into the hand of the overseers, and to the hand of the workmen." (2 Chronicles 34:17).
Utilizing money market checking accounts instead of basic checking may be a good financial decision when a person is looking at liquidity as a main investment concern. This particular type of financial instrument is fairly liquid. In times of economic uncertainty, it is critical that people maintain a decent level of liquidity. A liquid asset which includes short-term investment instruments are seen as cash in the financial world. It is often agreed that these accounts are a better hedge against inflation than other types of investments. This type of investment is very safe and it's a win-win for all parties. Frankly, the competitive interest rates of MMDAs are said to be well worth the inconvenience. Money market checking accounts are a reasonable investment option for a person wins the lottery, receives an inheritance or settles an insurance claim.
Money market accounts are also known as MMDA's or money market demand accounts. Actually any savings or checking account is considered a demand account. What money market checking accounts do for the depositor is that they allow access to liquid cash when absolutely necessary. Yet, each account can continue to generate interest as long as the minimum balance is maintained. Getting an account of this sort is perfect for the person who receives a windfall, settlement, or even a healthy tax return. The extra cash received could be put into such an account and the interest could be used to pay down current indebtedness, pay for an unusually high bill, or to save for rainy day. There may be a minimal fee or no fee at all. Money market checking accounts are just as accessible as a regular checking account through the use of check writing, automated teller machines, electronic debits and automatic monthly transfers. The rate of interest is less than that accrued for a money market savings account, yet it is usually better than for the typical savings account. For example, if a person were to have two savings and two checking accounts at the same financial institution. And one of each of this type of account is a regular account and the other type is an MMDA. For the savings account, the regular savings may have a interest rate of 1.75%, while the money market savings might be 3.85%. By the same token a regular checking account may have a interest rate of .50%, while a money market checking account may be at 1.85%. The highest yields will be for the longest periods of time.
Financial institutions often use money market checking accounts as a tool to bring in more customers. However, these instruments pose a greater risk to the bank than its counterpart; the MMDA savings account. Therefore, financial institutions require a high minimum balance and a limit on the number of transactions a person can make in a given month in order to hedge that risk. There are also some penalties accessed for dipping below the minimum balance and other penalties are assesses for making too many withdrawals from this type of account. Conversely, the perks for keeping the balance high may include free personal or business checks, waivers on maintenance fees, free cashier's checks, overdraft protection, and free money orders. In shorter term money market checking accounts, say three months, a person can earn some interest. For a higher yield, though, a person has to be willing to give up a tad bit of liquidity for six months or more. It is possible to link an MMDA to an existing account. For the depositor, doing this may make it more easy to transfer funds from account to account and otherwise provide overdraft protection. Another benefit to linking one account to another is for the ease of making electronic deposits.
The good news for people who choose to shore up their finances using money market checking accounts is that these accounts are very safe. Since the beginning of the Federal Deposit Insurance Corporation (FDIC) each depositor's funds has been insured up to an amount of $100,000. There has been one increase in that amount to $250,000 per depositor. The depositor's funds are backed by the full faith and credit of the United States government. Since the FDIC was first established, there has been no loss to a depositor of a single penny of FDIC insured funds. Deposit accounts, including checking and savings accounts, MMDAs and certificates of deposit (CDs) are covered by FDIC insurance. Stocks, bonds, annuities or municipal securities, and mutual fund shares, however, are much more risky. They are not considered deposit accounts and therefore do not carry the protection of the FDIC. "And they have gathered together the money that was found in the house of the LORD, and have delivered it into the hand of the overseers, and to the hand of the workmen." (2 Chronicles 34:17).
Utilizing money market checking accounts instead of basic checking may be a good financial decision when a person is looking at liquidity as a main investment concern. This particular type of financial instrument is fairly liquid. In times of economic uncertainty, it is critical that people maintain a decent level of liquidity. A liquid asset which includes short-term investment instruments are seen as cash in the financial world. It is often agreed that these accounts are a better hedge against inflation than other types of investments. This type of investment is very safe and it's a win-win for all parties. Frankly, the competitive interest rates of MMDAs are said to be well worth the inconvenience. Money market checking accounts are a reasonable investment option for a person wins the lottery, receives an inheritance or settles an insurance claim.
Money Market Checking Accounts
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