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Learn About Money Market Accounts

The use of money market accounts began in the early 80s when Congress passed an Act, which allowed financial institutions like banks to offer such types of accounts. Initially, there was a cap on the maximum amount of interest that can be offered to a client that owns a savings account. Therefore, financial institutions were giving customers household appliances as an incentive.

The sale of mutual funds by brokerages in the 70s pushed congress to make the change. Since then, financial institutions are allowed to offer clients higher interest rates on money market accounts.

What is a Money Market Account

This type of account is an interest-based account that is offered to customers by a bank or a lending union. In simple terms, a money market account is a type of savings account that operates using some characteristics of a checking account. However, a money market account offers clients significantly higher interest rates than a typical savings account.

Although a money market account has some checking account features, some restrictions are imposed on it. In addition, insurance coverage is provided for deposits made into the account. The insurance policy is issued by the Federal Deposit Insurance Corporation (FDIC).

Merits and Demerits of Money Market Account Works

Banks and other lending institutions offer money market accounts as traditional or online accounts. This type of account has several benefits and a few issues as well. The advantages and disadvantages of a money market account are described below.


  • A money market account has higher interest rates than what is typically obtained on a regular checking account.
  • Unlike a savings account, a money market account can be linked with a debit card or a cheque. This extra feature makes the account flexible and allows the owner to access funds at any time.
  • An account owner can comfortably deposit any amount of money without any fear of loss. This is possible because of the insurance coverage that is provided by FDIC, which is a privilege not enjoy on other account types.


  • The main aim of having a savings account may be defeated as the money saved can be quickly depleted because of the availability of several options for spending and withdrawal.
  • Although it is a form of a savings account, a money market account requires a high minimum balance. As a result, this type of account may be difficult to open for people with limited income.
  • A money market account has high maintenance fees or charges. The amount paid to own the account is much higher than that of a savings account.
  • Though a money market account may have a debit card and cheque attached to it, there is usually a limit to the amount of money that can be withdrawn within a giving window. Therefore, a person that owns such type of account may not be able to access funds when they need to.

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