The Complete Guide to Money Market Deposit Accounts

Think a money market account is just like a savings account? Think again. 

Money market deposit accounts are a great way to earn higher interest rates compared to regular passbook savings accounts and often come with the added benefits of check-writing and debit card privileges. But like other checking or savings accounts, MMDAs have some limitations that make them less flexible than regular bank deposits.

Here’s everything you need to know about MMDAs:

Check Writing and Debit Card

Most money market deposit accounts offer limited check-writing privileges and include a debit card with the account, making them a combination of savings and checking account, which can come in handy if you want a higher interest rate but you only need to access your funds on a limited basis.

Transaction Limits

Like most savings accounts, you are limited to six transfers and electronic payments every month. The transfers included here are pre-authorized transfers, telephone transfers, electronic transfers, checks or debit card payments to third parties, ACH transactions, and wire transfers. If the number of allowed transactions is exceeded, the bank will send you a warning or issue a fine. In worst cases, your transfer privileges may be revoked. 

The numbers of in-person transfers, however, are unlimited. These are the ones that you make at the bank, by mail, by messenger, or at an ATM. 

Minimum Balance

MMDAs typically require you to deposit a minimum amount into your account. To receive the maximum interest rate, you are required to maintain a minimum balance.

Monthly Fees

In most cases, you’ll be charged a monthly fee in case your balance falls below the minimum limit. 

Remember that any fee imposed will reduce your interest, so you must be careful to not let your balance fall!

This isn’t always the case; in some institutions, a fee is charged whatever the case, while in others, the monthly fee is fully waived provided you fit their criteria. 

Interest Rates

MMDAs continue to outperform saving accounts in how they offer a higher interest rate than them. This is because unlike saving accounts, they are permitted to invest in certificates of deposit (CDs), government securities, and commercial paper.

Money market deposit accounts offer several advantages over conventional savings accounts and might be a better choice for you in more ways than one.

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