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Local Money Market Accounts

Money market accounts, or MMAs are very similar to savings accounts. Both are an FDIC deposit that earn interest and can be withdrawn at any time. The principle difference is that MMA often come with check writing functionality, while savings accounts often do not. Since the account is not technically considered a transaction account, is subject to the same limitations as savings accounts: only six withdrawals per month are allowed under Regulation D. From a practical perspective, savings accounts and money market accounts are virtually the same.

Money market accounts should not be confused with money market funds. Money market funds are non-FDIC funds comprised of short term investment securities such as bonds and commercial paper. Banks often offer them as an alternative to money market accounts. In the past, money market funds often earned higher interest than money market accounts but since the global financial crisis, yields on money market funds have remained significantly below money market accounts. That, coupled with the lack of FDIC insurance, makes them an unattractive place to place savings.

Higher interest rate than a checking account, usually.

Personal service and interaction. Unlike an online account you are building a relationship with your banker by opening it in a branch.

Online access. Often, depending on the size of the bank, good online banking functionality.

Liquidity. Depositors can withdraw their money at any time.

Disadvantages:

A variable interest rate. Rates can change at any time. In a falling rate environment, this is a negative. In a rising rate environment, this is a positive.

A lower rate than an online bank. Branches are expensive and non-online banks often can’t afford to pay as much interest as an online bank.

To see how this account compares to other similar types of investments, please view the BestCashCow income guide. View it here.