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Money Market Deposit Accounts Make Perfect Sense

A terrific alternative to a cash savings account at many financial institutions are money market deposit accounts. As a liquid investment vehicle, a money market account is FDIC insured and a great way for consumers to earn a nice return on their funds. Let's take a look at the pros and cons of having a money market account.

Money market deposit accounts first came on the scene during the 1970s and grew in popularity during the 1980s, especially when interest rates climbed to historically high rates well above 15%. Combining the best of a savings account with a checking account, a money market account remains popular today even in these days of lower interest rates.

Pros

Money market accounts offer a nice interest rate on earnings, typically in the neighborhood of what financial institutions are paying for a certificate of deposit. You earn enough money with a money market account to stay ahead of inflation.

Liquid in nature, most money market accounts permit users to withdraw funds as many as three to six times per month. You can write a check, take money out via an ATM, or transfer monies to another account without paying a fee.

Money market accounts are FDIC insured.

Cons

Your minimum investment and monthly minimum requirements could be much higher than what is required with an ordinary savings account.

Some financial institutions are not paying a premium for their money market accounts. Instead, your rate could be as low as an interest bearing checking account so shop around for the deal that is right for you.

Falling below the monthly minimum can result in a high service fee as could writing one too many checks during a given month.

For some consumers using a money market account can mean avoiding paying fees to a bank for a checking account, especially if only a few checks are written each month for gas/electric, cable, and phone bill. Instead of maintaining separate checking and money market accounts a low use money market account could eliminate paperwork and monthly service charges while earning interest for the consumer.

Some financial institutions will allow consumers to link up various accounts thereby waiving or reducing minimum balance requirements as long as all of the deposited funds add up to a certain amount, like $2500 or more. Therefore, a money market account combined with other accounts could be the most effective way to ensure liquidity while paying enough on interest to make it all worthwhile.