What is a Money Market Account?
A Money market account is an interest bearing account at a bank or credit union. It is a savings account that banks and credit unions offer where higher interest rates are paid, more than traditional savings accounts. However, their minimum deposit and balance requirements are often higher.
The money market account should not be mistaken for money market mutual funds, which are mutual funds that invest in money market securities. Money market accounts are important for calculating tangible net worth. You can read more about mutual funds in Nigeria.
Money market deposit accounts prove to be better choices for the money you might need to tap at certain moments to cover an emergency or an unexpectedly enormous expense. They pay higher interest than ordinary savings accounts and give you immediate access to your money.
Money market account explained
The money market account has its own pros and cons when compared with other types of accounts. Its advantages include higher interests rates, insurance protection, check writing and debit card privileges.
For this account, Banks and credit unions require that customers deposit a certain amount of money to open an account where they have to keep their account balance above a certain level. A number impose monthly fees if the balance falls below minimum.
Money Market Account vs other accounts.
As earlier said, money market accounts pay better interest rates, and that is why several people go for it. The savings account might as well have similar interest rates to the Money Market Account.
But in contrast, the Savings account usually requires lower minimum opening deposit and lower balance requirements than the Money market account. Some money market accounts do well to have check-writing and debit card features. But, as with regular savings accounts, it limits them to several transactions in a month.
Advantages of Money Market Account
The advantages of creating a money market account are;
- Money market accounts come insured where all the money in the account remains even after the bank or credit union has stopped operation.
- Money market accounts also come with several benefits often associated with other bank accounts. It could be debit cards, online banking, etc.
- Unlike other accounts, money market accounts experience higher interest growth rates on money stored in the account.
- The account comes with check-writing privileges.
Disadvantages of Money Market Account
As there are always two sides to a coin, the Disadvantages of Money Market Account are;
- Limited and restricted number of transactions.
- Minimum balance requirement.
- Societal change such that money market accounts are susceptible to inflation risk.
How to open a Money Market Account
In Nigeria, opening a Money Market account will require that you first provide an initial investment, which varies depending on what the banks want.
It therefore advises that you should take your time and do your research well to find banks that suit your budget and need.
Several banks might also offer high-interest checking accounts, which may pay better rates than money market accounts, but on the downside, they impose more restrictions.
Before you open a Money Market account, you must first carry out reasonable research on the capital you have and the need of the capital.
You should also check for banks with rates and services to match your requirements.