Money Market Account

Money market accounts are a safe place to store your cash, but they don't come with the same protections as a traditional checking account. If you have more than $250,000 in any one bank, then the Federal Deposit Insurance Corporation provides deposit insurance that protects your money from being lost or stolen. Accounts with balances under the threshold enjoy no such protection. In fact, most money market accounts require a minimum balance of $2000 to open and maintain eligibility for monthly interest payments.

Changes in Interest Rates 

When interest rates rise across the board on all financial instruments, it is good news for those who choose to put their money into a money market account. Money markets typically offer higher rates of return compared to regular savings accounts. This is because of their higher degree of risk.

Money markets, like other savings accounts and CDs, are not federally insured like standard checking or savings accounts. However, some institutions do have the option to offer limited insurance on money market accounts. You can check with your account manager to determine what protection is offered for your account. So if you want a safe place to keep your money but you need the flexibility of withdrawals and competitive interest rates, then a money market account may be right for you.

Limitations on Withdrawals

Money market accounts typically limit the number of withdrawals that members are allowed to make each month. There may also be limits regarding how much money can be removed at one time via bank wire transfer or an ATM card. Having these limits helps protect the funds in your account from being accessed by someone else after a bank error. These limitations help make money market accounts a safer place to store your cash than standard checking or savings accounts, but it also means you'll need to check with the bank before withdrawing anything more than you're allowed to.

A money market account is a great choice for those who want higher interest rates and more flexibility than they'd find in a savings account; however, it's important that consumers understand what they're signing up for when opening these types of accounts. 

What is a Money Market Mutual Fund?

The concept behind a money market mutual fund (also known as an MMF) is relatively straightforward: It invests its shareholders' pool of capital into short-term, high-quality debt securities such as US Treasuries, commercial paper, and repurchase agreements.

The issuer of a debt security must be deemed creditworthy by the MMF's board of directors (the people responsible for making the fund's investment decisions and managing its portfolio), who typically rely on objective external ratings to make this determination. Once deemed so, the result is that said securities become "investment grade". While such securities are not risk-free, they come closest to it among fixed income securities because their issuers have both the ability and an incentive to meet their financial commitments – unlike their equity counterparts.

When we say short-term we're talking about periods between 3 months and 12 months – bonds with maturities outside these windows tend to be assigned longer-term status. The exact definition will vary from fund to fund and per country, with some having a limit of 5 years in place for example.

Not all investments held in an MMF fall under the category investment grade. The capital employed in its portfolio is used to invest in commercial paper issued by corporations, repurchase agreements (a short-term borrowing instrument often used by financial institutions), and bank certificates of deposit among other things. In fact, up to 35% of the assets professionals called "managers" are allowed to use are typically made up of securities that do not have an external rating.

Conclusion

Money market accounts are distinguished from most other types of savings products for their flexibility and easy-access features. However, there are some limitations on withdrawals, and money market accounts often offer lower interest rates than other types of savings accounts.