Pros and Cons of Money Market Account | Advantages of Money Market Account | Disadvantages of Money Market Account
Saving money is important for a future emergency fund that may come up. Money market account is one of the traditional secure savings that have been used for over the years. It is a government-insured bank account that gives high-interest rates and provides cash withdrawal privileges. The money market account offered by the banks has its own advantages and disadvantages.
Let’s take a look at the pros and cons of money market account:
Pros of Money Market Account
- Higher interest rate
One of the major advantages of saving money in a money market account is higher interest rates. There is no interest rate in checking accounts and savings accounts have less than 1%. With money market account you can get much interest with more money in the bank.
- No risk of balance loss.
Unlike other bank investment, there is no risk of losing your balance from a standard money market account. In the worst case scenario, there may be no interest rate but there is no influence of negative interest rate in this type of account.
- Easy Access to Money
Like any other savings and checking accounts, account holders can easily access their money from money market accounts through ATMs, transfers and checks. You can also move the money from one account to another as long as you haven’t exceeded your account limits.
- Offered by many financial institutions
There is an option in every financial institution to open up a money market account even though they don’t offer investment products. These allow customers to increase their money in a place near to their house.
- FDIC Protection
Money market accounts are usually insured by the Federal Deposit Insurance Corp up to the $250,000 limit per account which makes them as safe investments. This insurance further makes it with investors as it protects them against loss of deposit.
Cons of Money market Account
- More expenses in money market account
You need an annual maintenance fee for maintaining the accounts. There are additional fees based on consumer activity, monthly fees and also fee if the minimum balance threshold is not met. These fees may be small when paying, but they add up quickly in years which can sometimes also be more than the interest amount.
- Requires a minimum balance
The money market account holders need to maintain a minimum balance in their account. A different bank has a different minimum balance. For example, Bank of America requires a minimum balance of $2,500 for a Money Market Savings account.
- Fluctuation within the market.
There is fluctuation in the overall interest rate every day in the market. With an increase and decrease of interest rates, there is a change in the money market account too. With these fluctuations, it is hard to predict how fast the account will grow or what should be done to increase the money in the account.
- The limited number of withdrawals
Depending on the bank, many money market accounts will allow only a limited number of monthly withdrawals and transfers as per the banks’ rules and regulations. Many banks offer up to six transfers per month. This is quite inconvenient for people when there is an emergency and they may have exceeded the number.
So, these were all pros and cons of Money Market Account. Stay tuned for more useful information. You may subscribe to this website.