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Understanding The Money Market Account

Savings accountSavings account

According to Investopedia, a money market account is a savings account exclusively. This means it is not meant to be highly active unless the holder of this account is depositing money. Otherwise, the bank or financial institution imposes limitations on how many withdrawals the holder of an account can make each month from a money market account.

If a client involved in money markets makes more withdrawals than the five or six permitted per account, the institution will impose charges. It is also necessary for the client to have a minimum amount in her money market account. This will usually be $500 or more.

Wikipedia the free encyclopediaAs Wikipedia explains, this money market instrument differs from a capital market because money markets fund lucrative investments. The borrower is the institution which is indebted to the account holder. Usually, a money market account is opened for a specific purpose. The client will be saving for something highly expensive. This means that the money market account is also time limited, although this time could be extensive if the account is intended to save for something in the distant future (college fees, for instance).

Money market rates are typically highly competitive, and this is often more affordable to achieve in money markets than in capital ones. The money markets in question will not experience a great number of transactions, except for deposits. Whereas checking accounts undergo constant movement with deposits and withdrawals, this is not so with a money market instrument. In fact, many of the transactions occur at the other end: as the funds are invested into money markets.

Competitive marketIn fact, money market rates must be competitive because there is always another money market instrument working to lure customers to their side. Money market rates are set to encourage the investor. They are much higher than those set for regular accounts, but these returns are the result of careful investing using the money market instrument.

Researching many money market rates is easily done over the internet. Potential investors can also find out more about money market rates by visiting a bank in person, which is a convenient money markets opportunity to find out what areas of investment an institution intends to use this money market instrument for.

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