A money market account is no different from an ordinary savings account. Banks and credit unions also offer this account. What makes money market account from a regular savings account is that it usually pays interest with a higher rate. When it comes to minimum balance requirements, a money market account also has a higher rate. Lastly, you will be allowed to make withdrawals three to six times a month.

If you applied for a money market account through a qualified bank, the Federal Deposit Insurance Corporation (FDIC) insures the money in your account. What does this mean? If the credit union or bank got bankrupt or it went out of business for other reasons, the money that you have deposited will be returned to you. On the other hand, the National Credit Union Administration (NCUA) insures your money if your account is registered on a credit union. The NCUA is another federal agency that gives consumer protection from loss.

Though it seems that it is a wise decision to open a money market account you have to think a hundred times because if its advantages appeal to you, it has also many disadvantages. One question you should ask your self is that if these money market accounts are fully liquid. Well, money market accounts are not fully liquid. The depositors can easily access these accounts and are highly liquid. But if you compare your money market deposits to your checking account, they are not as liquid.

Another disadvantage is that even if the FDIC insures your money, the institution will only insure up to $250 000. So, if you have deposits higher than what can the institution insure you, you can do nothing if the bank/credit union goes out of business. You only get $250 000 at the end of the day. Also, it has high rate of maintaining the minimum balance. If you do not meet the minimum balance, you will face charges. The regular savings account only requires a minimum balance of $50, while the money market account requires a minimum balance of $5 000.

So, if you think that applying for a money market account is the best option, think again. You might be overwhelmed by the advantages of a money market account but look beyond these advantages and you will see that you are actually at risk of losing your money. Worse, you will be charged if you do not meet the requirements.