Are Money Market Accounts FDIC Insured?

You’ve probably heard of money market accounts. They are quite popular for various reasons and a great short to medium term form of investment with low risk. If you are wondering are money market accounts FDIC insured, the answer is yes. They are FDIC insured at banks and NCUA insured at credit unions so even if the financial institution goes under your money is safe up to $100,000. A money market account offers a higher interest rate than a traditional checking or savings account.

Before opening a money market account, shop around to see which institution has the highest rates. Banks and credit unions compete for customers often by trying to outdo each other with money market rates. Once you find the right bank or credit union, you can open a money market account with a minimum deposit that will vary depending on the financial institution you are using, in some cases it might be $250, in others it could be $1000 and some banks might require even more. Of course these are only examples and the actual minimums may be different. This is another thing to compare besides interest rates when choosing where to open an account.

The money you deposit into a money market account is invested into certain vehicles like certificates of deposit and treasury bills. The whole premise behind the money market account is that the financial institution is borrowing your money to lend to other patrons, at a rate higher than what you receive, however as stated prior money market accounts offer higher returns than checking or savings accounts, sometimes as much as double the interest.

For the most part, a money market account is a good investment, especially if you want something to balance your portfolio. An ideal portfolio has a good ratio of different risk levels and different types of investments, of course everyone is different. If you need help building an investment portfolio with which to meet your financial goals, consult an investment professional.

There are only a few disadvantages with a money market account. In addition to the aforementioned minimum deposit, you may not be able to access your money as you wish without incurring penalties. And, there is a withdrawal limit imposed monthly, if you make more withdrawals than the minimum you also get penalized. The best strategy is to regularly deposit money in the account and try to avoid making withdrawals so you get the most interest possible.

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