Money Market Accounts

It’s always confused me a little when people talk about money market accounts. So, I set out today to figure things out. It turns out my confusion was caused by the fact that there are two different kinds of money market “accounts”. There are money market mutual funds and there are money market deposit accounts.

Money market mutual funds are actual funds where people purchase shares. The fund’s payout earnings on the shares to their shareholders. The funds attempt to keep the value of each share at $1. So basically, if you have 1000 shares in your money market mutual fund, they will almost always be worth $1000. Money market mutual funds are not FDIC insured, and they can lose value (although that seems to be very rare).

According to the FDIC Compliance Handbook, a money market deposit account (or MMDA), on the other hand, is “a savings deposit that permits. The depositor to make no more than six transfers and withdrawals per calendar month or statement cycle of at least four weeks to another account of the depositor or a third party. No more than three of the six transfers can be made by check, draft, debit card, or similar order to a third party.” These types of accounts earn interest and are FDIC insured. They sometimes have minimum balance requirements or tiered interest based on your balance.