Facts About Money Market Accounts
A money market account is a type of mutual fund that functions like a savings account. Money market accounts pay higher interest rates than conventional savings accounts, yet give you more access to your money than a CD (certificate of deposit). When you open an account with a money market fund, your investment is used to trade short-term government and corporate bonds (such as Treasury bills and "commercial paper"), usually with maturities of less than 90 days. Historically, money market accounts have proved to be very safe investments.
Other People Are Reading
-
Variable Rates
-
Because the makeup of a money market fund portfolio changes as short-term bonds mature and are replaced, interest rates are variable and are usually updated once a week.
Providers
-
Banks, credit unions and other financial institutions offer money market funds. The largest non-bank fund providers are Vantage, Fidelity and Charles Schwab.
-
Share Value
-
Money market funds pledge to maintain the $1 par value of the shares you buy. It's extremely rare for money market fund shares to fall below this par value.
Access
-
You can write a limited number of checks on a money market account, although you do have to maintain a minimum balance or be assessed a penalty fee.
Best Rates
-
Large non-bank institutions usually offer the best money market interest rates. Accounts that require large minimum investments ($5,000 and up) also pay higher rates.
Tax-Free Accounts
-
Some money market accounts are with funds that invest in tax-exempt bonds issued by state and municipal governments, and/or in Treasury bills that have tax advantages.
-
