Maria Adams, Credit Cards Moderator
@m_adams
Money market accounts are safe because they’re almost always insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) up to $250,000. So, even if the bank or credit union fails, your money is not lost.
Although money market accounts do not yield as much as some other investments, they also do not carry the same inherent risks. With a money market account, your principal always remains intact, which is not the case when it comes to stocks, bonds, real estate, or even money market funds. A money market fund is a type of mutual fund that is low-risk but could lose value.
Finally, it is important to note that interest rates for money market accounts are variable. Variable interest rates can change based on a number of factors, including the macroeconomic environment, competition between financial institutions, and the financial institution’s individual performance.
You can compare the best money market accounts here at WalletHub.
People also ask
What are the pros and cons of a money market account?
The pros of a money market account are relatively high interests, FDIC or NCUA insurance, principal protection, and liquidity. The cons are minimum balance requirements, transaction limits, lower returns compared to other investments, and inflation risk. It’s imported to weigh the risk versus the rewards to determine if a money market account can help you achieve your financial goals.
Pros and Cons of a Money Market Account
| Pros | Cons |
Is money market safer than savings?
No, both money market and savings accounts are safe places to keep your money.
While they may have some differences, both types of accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per insured bank, ensuring protection in case of bank failure.
Ultimately, the best choice for you depends on your individual needs and financial goals, compare the best savings and money market accounts to make sure that whatever decision you go for really fits...
read full answer by Alexandra Barring, Banking ModeratorCan a money market account lose money?
A money market account can lose money through two ways: inflation risk and default risk.
- Inflation Risk: Occurs when the interest earned from a money market account falls below the rate of inflation. Then, the real value of the investment diminishes over time.
- Default Risk: This refers to the possibility that the issuer of the money market account fails to repay you the principal or interest as agreed. This can happen if the issuer...
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