A bank money market account is a type of savings account that gives the account holder limited access to their funds while earning a competitive interest rate on the balance held in the account.

Money market account interest rates are variable, which means the interest rate paid on these bank accounts can change frequently. Interest rate changes will have a direct affect on the rate of return provided by money market account holder.

The calculation for the interest earned on a variable interest rate bank account is similar to interest calculation for fixed rate accounts. The key difference with the variable rate account as compared to fixed rate options is that the account holder can calculate the interest that will be earned for only the period that the interest remains in effect. Unless the bank guarantees the interest rate for a select period of time, which may be found with promotional money market account offers, the interest rates on a bank money market account can change at any time at the bank’s discretion.

Any changes that a bank makes to the interest rates will be immediately reflected in the yield on the money market account. When interest rates go up, money market yields increase and the account holder is rewarded for having a variable rate account however, when interest rates goes down the account holder is going to receive a lower rate of return.

When interest rates rise and fall, the account holders can earn more or less in money market accounts immediately. How fast the change occurs will depend on the individual bank. Because money market accounts are bank products that are covered by FDIC insurance, they are considered risk free investments. These accounts are attractive to savers and investors because investors can earn a competitive rate of return with little risk.

The interest rates offered on money market accounts and their rate of change are affected by a number of factors. The biggest factors impacting changing money market account rates are the general level of bank savings rates and lending rates and actions by the Federal Reserve that influence short term interest rates.

The general level of bank savings rates change based on market interest rates for comparable interest bearing products such as Treasury rates, competition among banks in the region in which the bank is based and the returns the bank is earning on depositors funds which are by and large made by the lending activity of the bank.

The actions of the Federal Reserve that include changes in the Federal Funds Rate and open market transactions can lower or increase short term interest rates that will in turn impact bank rates and money market account rates. The Federal Reserve regularly takes actions to move interest rates in response to changes in the economy and inflation.

When the Federal Reserve cuts interest rates, banks will usually decrease the interest rates they pay on savings accounts, money market accounts and certificates of deposit. Consequently, consumers will earn less interest on their variable rate money market accounts. Sometimes the rate cuts made by the Federal Reserve will take a few weeks to be reflected in bank rates. Of course, the Federal Reserve can also take action to raise interest rates which will bring about an increase in bank rates and money market account rates and increase the yield account holder can receive.

Additional money market resources, including the top ten money market account rates and top savings account rates can be found at Savings Account Rates or Money Market Account Rates. To see information on the best online banks refer to Best Online Bank or the best online savings accounts available see Best Online Savings Account.

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