Are Money Market Accounts Covered by the FDIC?
These days, many investors want to protect their savings with FDIC insurance. If you are considering investing in a money market account, make sure you open the right type of account if you want your deposits insured. You can choose between two similar-sounding investments: money market deposit accounts and money market mutual funds -- but only one type has FDIC insurance.
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Money Market Mutual Funds
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Money market mutual funds, as well as stock mutual funds, do not carry FDIC insurance. Do not confuse these investments with money market deposit accounts, even if you buy them at a bank or a similar location. Money market mutual funds invest your money in different ways, such as in United States Treasury securities or bonds.These funds may offer a higher return than a deposit account, but read the prospectus, if it says "mutual fund," the FDIC does not insure it.
Money Market Deposit Accounts
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Money market deposit accounts, also called money market accounts, have FDIC insurance if you open them in a bank or other savings institution showing the FDIC logo and listed on the FDIC "Bank Find" website. These accounts resemble savings accounts, but usually pay higher interest and allow a limited number of withdrawals by law. The FDIC covers them in the same way as other deposit accounts in the bank, including regular savings accounts.
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FDIC Insurance Limits
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You have an FDIC insurance limit of $250,000 per bank and per depositor for each category of account ownership. Accounts in different branches of the same institution count as one bank. However, you can have insured money market accounts in as many different banks as you want if you stay within insurance limits. Note that the FDIC adds together all your accounts at the same bank for insurance purposes if they have only one individual name on the title.
Expanding Coverage
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To expand your FDIC coverage, you need to hold title to multiple accounts in different ways, such as singly, jointly, as trust accounts and so on. The FDIC shows how a family of four can insure up to $3,000,000 at the same bank by creating the accounts with the proper titles. For example, the FDIC insures a joint account for a husband and wife for up to $500,000 or $250,000 for each of the co-owners. You can calculate your coverage for money market accounts in different categories using the FDIC insurance estimator. See the Link in Resources.
Other Government Deposit Insurance
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You can also open an insured money market deposit account or other savings account in a federally-insured credit union. The National Credit Union Administration, or NCUA, insures accounts in credit unions in the same way as the FDIC for banks. The same limit of $250,000 applies to member credit unions, and similar rules cover multiple accounts for different categories of ownership. See the links in Resources to find out whether your credit union belongs to the NCUA and to calculate your insurance coverage.
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