Are Money Market Accounts FDIC Protected?

FDIC covers specific money market accounts

The FDIC, Federal Deposit Insurance Corporation, is a government agency created by Congress. It protects your bank deposit accounts up to $250,000, per co-owner, if a joint account, in case your bank fails. If you have several accounts in the same name at the same bank, then the insurance does not apply to each account, but rather to overall holdings. If you have set up different accounts, individual, joint, trust, etc., with different legal names, then the insurance will apply to each one. However, only certain types of accounts are protected by the corporation.

Insured Accounts

You might have several different types of accounts set up in your bank. The ones protected by FDIC include checking, savings, certificates of deposit, CDs and money market accounts. Any other financial product, including stocks, bonds, mutual funds or annuities, is not covered by the corporation.

Bank Money Market Account

The money market accounts protected by FDIC are the ones set up by your bank. They usually provide a higher fixed interest rate than a savings account, but include limitations on funds usage. Typically you are limited as to how many withdrawals you can make or how many checks you can write in a single month. Other than this these accounts are very similar to savings deposits.

Mutual Fund Money Market Account

Mutual fund money market accounts invest in short-term commercial paper pools issued by corporations and do not have a fixed rate of return. This is similar to investing in a bond mutual fund but with significantly lower returns and much less volatility. These types of money market accounts are not protected by the FDIC.

Considerations

Opening a money market account in a financial institutional can be confusing to less savvy investors. Today, banks offer many types of investment vehicles and you should make sure you understand what they are. Ask your banker what type of the money market account you are opening and if it's insured by FDIC before making the investment.

References

• FDIC: Deposit Insurance Summary
• FDIC: Insured or Not Insured?