What are the Pros and Cons of a Money Market Account?
The pros of a money market account are the higher interest income in comparison to a saving account as well as the ease of access. The ease of access in terms of money withdrawal, writing cheques, or even having a debit card with some of those accounts.
While the cons in comparison to a savings account are as follows:
- the minimum balance required in order to have an MMA
- restriction on accessing the account with a limited number of cheques
- Restriction on number of withdrawals during the month which is less flexible than a savings account
How does a money market account work?
It works in the same way as other deposit accounts. However, it offers a higher interest rate than other savings accounts. Further, the it carries a few restrictions on the number of withdrawals that can be limited to 3 to 6 withdrawals per month.
What are the disadvantages of a money market account?
It requires a minimum balance otherwise monthly service charge will be applicable. The interest rates available are higher than those offered by the savings account. However, these interest rates are lower than other interest or returns offered by other types of investment schemes. The limitations on the number of money withdrawals allowed per month add to the operational difficulty for any investor.
Which is a better CD or money market account?
Both MMA and CD are bank products offering a lower interest rate. However, MMA can prove to be a better option when it comes to ease of access and cash withdrawal without penalties. Additionally, the relatively higher interest rates compared to CDs makes it more attractive. On the other hand, CD offer better interest rates for long term investments if the money was not withdrawn
How much amount should you keep in a money market account?
The money market account no doubt offers easy access to your invested amount but at the same time, it also carries lower interest as compared to other investment schemes. An investor might consider investing in these accounts as apart of the entire investment portfolio but not as an individual investment option.
How much interest do money market accounts pay?
Interest for these accounts may vary from one bank to another in addition to the amount deposited in this account. The interest rate for these accounts are changing over time and it has dropped over the last 10 years.