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To understand money market accounts and funds, it helps to know the difference between the two, and to understand what the "money market" is to begin with. It is simply a generic name used to describe the market wherein banks and other financial institutions lend, borrow and trade money, Certificates of Deposit (CDs) and other financial instruments.
A money market account is basically a premium account, or a high interest savings account. Also known as an MMA, this type of account should not be mistaken for a money market fund. A fund is an investment strategy with larger returns than a premium savings account. An MMA can be opened very simply at almost any bank. The money you keep in such an account will be invested, but the bank or other institution does the investing and collects the return.
Your money is usually put into investments like CDs, Treasury Bills, or other safe financial instruments. Each of these are low risk, short-term investments. Your reward for allowing the financial institution to use your money is a premium interest rate, one that may be up to twice as high as a typical passbook account.
Like other bank accounts, a money market account from a US bank is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $100,000 US Dollars. While you may find what looks like a better deal on an account offered by a big corporation, remember that the FDIC does not insure their accounts. If the company files bankruptcy, you lose your money.
While a money market account makes a decent low risk investment, keep in mind that because it is an investment, there are certain restrictions. Your money will not be as liquid as it is in a regular savings account, and it usually requires a minimum deposit, as well as a minimum balance. While you can make withdrawals from the account, there is a limit to how many you can make in a month's time. You cannot withdraw an amount, or combined total of amounts, that causes your balance to go below the minimum without penalties.
Jarnkm- I don’t know the answer to your question. I am sorry that happen to you. I know that withdrawals of $10,000 or more are tracked by the government no matter who you are.
On another note, I like the idea of a money market account because it does bear interest, but you are limited to only writing a few checks a month.
It is better to get a high interest checking account at a credit union. My credit union offers an APY of 2.25% for balances up to $20,000.
There are conditions such as you have to use your debit card so many times a month and you have to have direct deposit and accept E-Statements instead of mailed accounting statements.
But if you perfer to get an online money market account, you should look at bankrate to see the best money market rates available.
The other day, my wife withdrew $9,999 from our money market account, after being told that it would be under the $10,000 (limit) and not "raise a flag." Yet, within 36 hours, our banker calls and says that a government "inspector" called and said that the "withdrawal" raised a red flag and is considered "suspicious activity", including but not limited to: money laundering, etc. She also said that the monies could not be withdrawn, but could be transferred, causing other flags to be raised, leading to an investigation on both of us to determine if both or either is or has ever been associated with anything that would be considered "possible terrorist activity." Given the new Department of Homeland Security Assessment Reports: displaying an "Anti-Abortion" or "NRA" decal or bumper sticker would label a person as being a "possible terrorist" suspect! Sad and sick, yet true! Question: Can they refuse to release your remaining funds to you or someone authorized by you to serve in your absence?
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