Is a Money Market Account FDIC Insured?
Banks offer two types of money market accounts: money market deposit accounts and money market mutual fund accounts. Only a money market deposit account is covered by FDIC insurance.
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What is a Money Market Deposit Account?
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A money market deposit account functions similarly to a savings account, but pays a higher interest rate because of higher minimum balance requirements. These accounts are insured.
What is a Money Market Mutual Fund?
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A money market mutual fund invests the money in the account into short-term debt securities that have a maturity of no more than 13 months. Though they are generally very safe investments, the debts do have the potential to lose money and are not FDIC insured.
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What is FDIC Insurance?
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FDIC insurance, run by the Federal Deposit Insurance Corporation, protects consumers' bank accounts in case the bank fails. The program originated in 1934.
How Much is Covered?
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FDIC insurance protects up to $250,000 per person per bank in the event the bank goes under.
Considerations
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Money market mutual funds have the potential for a higher return than money market mutual funds. However, they also have a small potential to lose money. With a money market deposit account, you are guaranteed a fixed rate of return and the investment is protected against bank failure.
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