Money market deposit accounts (MMDAs), like regular savings accounts, are available to consumers through banks and credit unions. And like savings accounts, they are extremely safe places to park your cash. That’s because both products are insured through either the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). So even if the bank or credit union fails, you’ll get your money back, at least up to the limit of $250,000 per depositor, per insured institution. A few institutions out there are exempt from FDIC or NCUA oversight, so if you have any doubt, ask about insurance coverage.
MMDAs and savings accounts are both subject to a restriction of no more than six transactions per month, not including deposits. That restriction is imposed by the Federal Reserve Board, so it will not vary from institution to institution. Both MMDAs and savings accounts might or might not offer checks and ATM cards as part of the deal. And unlike CDs, both products allow you to withdraw funds as needed, as long as the withdrawals fall within that six-per-month limit.
The difference between the two products is that the average MMDA provides a higher interest rate than the average savings account. That’s because MMDAs require higher minimum balances. Does that mean that every money market account will offer a higher interest rate than every savings account? No. It pays to shop around. But the general rule of thumb is that the higher the minimum balance, the higher the interest rate. The minimum-balance requirement varies from product to product, and can soar into the tens-of-thousands. If the account dips below that minimum, the bank will assess a fee.