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What is a Money Market Deposit Account?

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  • Written By: N. Madison
  • Edited By: Jenn Walker
  • Last Modified Date: 16 September 2016
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A money market deposit account is a type of bank account that typically offers higher interest rates than ordinary savings or checking accounts. It may be thought of as a combination savings and checking account, as a person may use it to keep money in savings but may also write checks on the account. Despite the fact that account holders are usually able to write checks on these accounts, with some restrictions, money market accounts are often officially categorized as savings accounts.

A person can open a money market deposit account at most banks, credit unions and other financial institutions that grant savings accounts. These accounts often require higher opening deposits, and some require higher monthly balance minimums as well. For example, a person with a low balance in a savings account may not incur low-balance fees or may be charged a small fee, depending on the bank and the particular account. A money market deposit account, however, may have rules that require a person to keep $1,000 US Dollars (USD) or some other amount as a minimum balance. If the balance falls below the minimum, the account holder is charged a fee, which may be hefty.

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With a money market deposit account, an account holder may also see differences in the kinds and number of transactions that are allowed each month. For example, many money market deposit accounts have terms that limit an account holder to six withdrawals per month and three checks per month. For this reason, this account may be better for someone who has money to invest for a significant amount of time rather than someone who needs to withdraw from an account to pay bills.

When someone opens a money market deposit account, he deposits money and leaves it there. While it’s on deposit at the bank, the bank benefits by loaning his money to others and charging them interest on the loan amounts. In turn, the bank pays the account holder interest. It still makes money, however, as it pays the account holder less money than it charges for the loan. This means the account holder benefits from interest earnings and so does the bank.

The amount of interest a person may receive on money in a money market account may vary from bank to bank and country to country. In an effort to obtain more account holders, some banks may offer higher interest rates that lure in consumers. Additionally, some banks offer higher interest rates for those with higher account balances.

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