A money market account is much similar to a savings as well as a checking account. It basically refers to a financial place wherein individuals can easily deposit their funds in a bank or even in a credit union. At the same time, the interest that is earned along with the limited access to write down cheques also form a part of the money marketing account system.
|Benefits of money market Accounts||Drawbacks of money market Accounts|
|Easy access to the funds||Preferable for large minimum balance|
|Ensures higher interest rates||Limitations of transaction|
|Best place for stocking money||Not suitable for everyone|
|No issues pertaining to liquidity||Does not guarantee safety insurance|
|Serves best for emergency funds||Introductory rates of interest|
|Provision of debit or ATM card|
Advantages of Money Market Account:
• Easy access to the funds:
Money market accounts are found to lie somewhere between a savings and a checking account. Therefore, one of the biggest advantage that they provide is the fact that they allow the user with an easy accessibility to all of his or her funds.
They have certainly worked on this particular feature by allowing an individual to write a particular amount of paycheck every month. It also allows one to withdraw cash quite conveniently.
• Ensures higher interest rates:
Money market accounts have gained immense popularity for ensuring considerably higher rates of interest as compared to savings account. They are completely FDIC insured. Their NCUSIF insurance for the credit unions also grants people with the benefit to earn higher amount of money every year. They also ensure the users with a safe kind of investment procedure.
• Best place for stocking money:
As compared to their stock as well as bond counterparts, the money market accountsare seen to have lesser amount of risk involved. This makes them a great place for stocking money that can be used for future purpose. Apart from this, the money market accounts are also seen to generate a smaller amount of single digit return for all the wide range of investors. This makes them immensely attractive in a down market environment.
• No issues pertaining to liquidity:
Money market accounts are generally not seen to make any investments in securities that are found to have a little rate of following. Instead, they are mostly seen to trade in such particular kind of entities which are not in much high demand. This makes them much more liquid which allows the investors to purchase as well as sell with considerable amount of ease.
• Serves best for emergency funds:
Money market accounts are extremely beneficial for the individuals who might require the money in the near future. They are extremely useful for relatively large-scale, infrequent expenditures which especially include the emergency funds. The money market accounts provide one with the allowance to earn smaller returns while ensuring the safety of the funds.
• Check-writing advantages:
With the help of such highly accessible money market accounts, check-writing can be effectively used for the withdrawal of money. There are certain money markets with higher interest rates which allow easier methods of fund tapping by constraining the money movement.
• Provision of debit or ATM card:
Similar to cheque writing advantages, money market accounts also ensure to provide their users with the benefit of using debit or ATM cards. If an individual has both their accounts housed with a particular bank, then such money transactions can definitely happen in no time. However, with different accounts, such delay might not be more than a single business day.
Disadvantages of Money Market Account:
• Preferable for large minimum balance:
The money market accounts might only be accessible for such individuals who have nearly $2500 in the bank account. If one’s account balance is below that particular amount, then he or she needs to pay a monthly fee which serves as a backdrop for their returns.
• Limitations of transaction:
A user can easily have an access to cash a particular amount from a money market account. However, the individualsare not allowed to make payments with the help of one’s chequebook or debit card after using the same for six months in a single month. Certain banks are seen to allow a time period of only three times on a monthly basis.
• Not suitable for everyone:
Money market accounts are often seen to be unsuitable for various users and for fulfilling their respective needs. If an individual is seen to be using a series of CD ladder, then he or she can expect to earn good amount of returns while storing some portion of it in a liquid form. This is followed by minimizing the withdrawal penalties on an early notice.
• Does not guarantee safety insurance:
Such type of accounts should not be mixed up with the money market mutual funds. Instead one should ensure that they have a money market account which is connected with a bank or a credit union. This is the only way that the funds can be insured in the most effective manner. The bank or credit union should be consulted for the verification of the funding process so as to ensure utmost security.
• Introductory rates of interest:
In such situations where the interest rates sound quite good enough which is hard to believe, then the user should double check the entire process. This should be done so as to ensure that the rate of interest is a permanent one and not a promotional one which might vanish in a month.
A money market account, therefore, serves the purpose of being a better and convenient option as compared to the traditional systems. It serves as a solid opportunity for an individual to obtain the beneficiaries of a particular compound interest. However, inspite of having a number of attractive features, a user should be well aware regarding the entire process before opening such an account.
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