What Are Treasury Money Market Accounts?
Money market accounts are savings accounts that offer you a safe way to earn a higher interest rate than a traditional savings account. They invest in safe, short-term securities, such as certificates of deposit or Treasury bills. A money market account that invests in Treasury-backed securities is a Treasury money market account.
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Availability
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Treasury money market accounts can be set up through any bank or investment firm. The financial institution uses funds deposited into the Treasury money market account to invest in Treasury bills.
Characteristics
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Treasury bill securities are available with four-, 13-, 26- or 52-week maturity dates, with a minimum purchase price of $100. Unlike a traditional savings account that pays interest on deposited funds, the financial institution purchases a Treasury bill at a discount rate. The face value of the bill comes due at maturity, much like a savings bond.
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Advantages
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Treasury money market accounts are low-risk investments insured by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000.
Disadvantages
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Treasury money market accounts require both a minimum deposit and a minimum balance to remain open and are not as liquid as a traditional savings account. While withdrawals are allowed, the number of withdrawals you can make per month depends on the financial institution.
Considerations
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A Treasury money market account is not the same thing as a money market fund. Treasury money market accounts contain only Treasury securities, while a money market fund contains a mix of investment securities.
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References
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