MONEY MARKET SAVINGS ACCOUNTS: THEIR NATURE AND PURPOSE

2007-06-20 15:49:53

( Financial )



Money market savings accounts work like a savings account provided by banks and credit unions which is similar to a standard savings account. The main difference is that money market savings account charge higher interest, greater minimum balance, and only permits three to six monthly withdrawals. Another distinction is that, like a checking account, offshore bank accounts will allow writing up three checks every month.

In the same manner, your money market accounts are protected by bank insurance, so that even if the bank or credit union closes down your money remains intact.

Why Invest In Money Market?

When you invest in a high yield savings account such as a money market you allow your investment to gain interest which is how a standard savings account works. The interest gained is used as payment so that your money can be used to finance loans to other people. However, it does not mean that you cannot get your money at a time you need it. Basically, that is how the system works.

The difference in the interest they charge you compared to the interest charged to other people is part of how they maintain their business.

How Do Interest Work?

Interest on money market savings accounts are commonly compounded each day and settled on a monthly basis. The best thing about compounding interest is that the bank pays you interest on cash they charged you in interest.

Interest rates charged by money market savings accounts can differ from one bank to another. This is due to the fact that some banks are making an effort to set-up an account with them than others which is why they charge higher rates.

The difference in opening a money market savings accounts is that the more money you invest the higher is the interest rate charged. Always negotiate with the bank about how your interest rate may be modified.

Additional Charges

Similar to a regular savings account, money market savings account, allows you to take out money any time you need it. But, you have a monthly limit as to how many withdrawals you can make. Banks commonly charge a certain amount if you fall short of the required monthly balance in your account. Certain fees may also be charged for separate withdrawals beyond the maximum monthly withdrawals.

For these conditions, you should always look around and compare the charges offered by various banks. These features may include:
• Fees and services cost charged on your account
• Lowest balance required
• Rate of interest charged on your balance

The only other thing to keep in mind is to put regular deposits into your money market savings account and then sit back as you watch your investment increase rapidly.


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