When you go to a bank to open a new account, you will have a variety of account types and features to choose from. Should you choose the basic checking option or an account that earns interest? Do you want the convenience of a bundled checking and savings account or the higher returns of a money market account?
It may be insured and secured. Unlike money invested in stocks and bonds or other investment. A money market account (MMA) or money market deposit account (MMDA) is a deposit account that pays interest based on current interest rates in the money markets. A money market account is a type of savings deposit account that can be found at banks and credit unions. These high-rate money market accounts may pay a higher interest rate than traditional. Yes, your Wells Fargo Bank money market accounts are insured up to $250,000 per person by the Federal Deposit Insurance Corporation (FDIC). The FDIC is an independent agency of the United States government that protects you against the loss of your insured deposits if an FDIC-insured bank or savings association fails.
“ It’s helpful to first understand the differences between the primary bank account types. ”
To make these decisions, it’s helpful to first understand the differences between the most common bank account types. Here are some definitions to help you navigate your banking needs:
Checking account: A checking account offers easy access to your money for your daily transactional needs and helps keep your cash secure. Customers can typically use a debit card or checks to make purchases or pay bills. Accounts may have different options to help avoid the monthly service fee. To determine the most economical choice, compare the benefits of different checking accounts with the services you actually need.
Savings account: A savings account allows you to accumulate interest on funds you’ve saved for future needs. Interest rates can be compounded on a daily, weekly, monthly, or annual basis. Savings accounts vary by monthly service fees, interest rates, method used to calculate interest, and minimum opening deposit. Understanding the account’s terms and benefits will allow for a more informed decision on the account best suited for your needs.
Certificate of Deposit (CD): Certificates of deposit, or CDs, allow you to invest your money at a set interest rate for a pre-set period of time. CDs often have higher interest rates than traditional savings accounts because the money you deposit is tied up for the life of the certificate – which can range from a few months to several years. Be sure you do not need to draw on those funds before you open a CD, as early withdrawals may have financial penalties.
Money market account: Money market accounts are similar to savings accounts, but they require you to maintain a higher balance to avoid a monthly service fee. Where savings accounts usually have a fixed interest rate, these accounts have rates that vary regularly based on money markets. Money market accounts can have tiered interest rates, providing more favorable rates based on higher balances. Some money market accounts also allow you to write checks against your funds, but on a more limited basis.
Individual Retirement Accounts (IRAs): IRAs, or Individual Retirement Accounts, allow you to save independently for your retirement. These plans are useful if your employer doesn’t offer a 401(k) or other qualified employer sponsored retirement plan (QRP), including 403(b) and governmental 457(b), or you want to save more than your employer-sponsored plan allows. These accounts come in two types: the Traditional IRA and Roth IRA. The Roth IRA offers tax-free growth potential. Investment earnings are distributed tax-free in retirement, if the account was funded for more than five years and you are at least age 59½, or as a result of your death, disability, or using the first-time homebuyer exception. Traditional IRAs offers tax-deferred growth potential. You pay no taxes on any investment earnings until you withdraw or “distribute” the money from your account, presumably in retirement. Both types of IRAs offer investment flexibility, tax advantages, and the same contribution limits. You may want to discuss which type is best for you with your tax advisor before choosing your account.*
Once you understand the types of accounts most banks offer, you can begin to determine which option might be right for you.
Tip
Interest rates can be compounded on a daily, weekly, monthly, or annual basis.
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Money Market Savings. You may write checks on some money market accounts, but typically on a more limited basis than a checking account.
Money Market Deposit Account Definition
Incorrect.
Money Market Savings. You may write checks on some money market accounts, but typically on a more limited basis than a checking account.
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*Traditional IRA distributions are taxed as ordinary income. Qualified Roth IRA distributions are not subject to federal income tax provided a Roth IRA has been open for more than five years and the owner has reached age 59½ or is disabled, using the first time home-buyer exception or taken due to their death. Both may be subject to an IRS 10% additional tax on amounts subject to income tax if distributions are taken prior to age 59½.
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Not Insured by the FDIC or Any Federal Government Agency
Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested
Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.
LRC-0221
A money market account (MMA) or money market deposit account (MMDA) is a deposit account that pays interest based on current interest rates in the money markets.[1] The interest rates paid are generally higher than those of savings accounts and transaction accounts; however, some banks will require higher minimum balances in money market accounts to avoid monthly fees and to earn interest.
Money market accounts should not be confused with money market funds, which are mutual funds that invest in money market securities.
United States[edit]
Features[edit]
Best Money Market Accounts
Money market accounts are regulated under terms similar to ordinary savings accounts. They are insured by the FDIC (unlike money market funds), and although they may provide checking services, the restrictions of Federal Reserve Regulation D have discouraged their use for day-to-day payment purposes. In practice, money market accounts are distinguished from ordinary savings accounts by their higher balance requirements and their more complex interest rate structure.
Money Market Deposit Account Vs Money Market Fund
History[edit]
Money Market Deposit Account
The Depository Institutions Deregulation and Monetary Control Act of 1980 set in motion a series of steps, designed to phase in the deregulation of bank deposits, permitting a wider variety of account types, and eventually eliminating interest ceilings on deposits. By the subsequent Garn–St. Germain Depository Institutions Act of 1982, on December 14, 1982, money market accounts were authorized with a minimum balance of no less than $2,500, no interest ceiling, and no minimum maturity, allowing up to six transfers out of the account per month (no more than three by check) and unlimited withdrawals by mail, messenger, or in person.[2] Minimum denominations were eliminated on January 1, 1986, and the limitation that no more than three of the maximum six monthly outward transfers could be by check was eliminated on May 3, 1988.
Best Money Market Rates Today
References[edit]
Money Market Deposit Account Facts
^Dlabay, Les R.; Burrow, James L.; Brad, Brad (2009). Intro to Business. Mason, Ohio: South-Western Cengage Learning. p. 482. ISBN978-0-538-44561-0.
^Gilbert, Alton, 'Requiem for Regulation Q: What It Did and Why It Passed Away', Federal Reserve Bank of St. Louis, February 1986
Money Market Deposit Account (mmda) Definition
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