HIGH INTEREST MONEY MARKET ACCOUNTS: THE ADVANTAGES AND DISADVANTAGES

2007-06-20 15:49:53

( Financial )



A money market account works just like any other bank investment, like a fixed-term deposit or notice deposit. Your money is deposited into the account and gains interest for as long as the money is maintained as an investment.

Some high interest money market accounts restrict your transactions to deposits, withdrawals and balance transfer from one account to another, while others permits you to perform the complete line of transactions. The main reason why transactions involving best money market accounts are limited is to persuade you to invest rather than transact. The manner in which the transaction fees are designed is to also convince you to keep your investment.
Transaction accounts may have reduced monthly charges compared to investment accounts which provide lesser features and lower charges.

High interest money market accounts are processed by banks as regular investment accounts and interest is computed on a day to day basis and profited to your account once in a month.

Advantages of Money Market Accounts

The main advantages of high interest money market accounts include:
• Your cash is not fastened into a particular term of investment as compared to a fixed or notice deposit. You can deposit your cash into a money market account now and take it out the next day even without informing the bank. Clearly, the lengthier your money is kept in the account, the higher the interest you will gain.
• Your investment in a money market account is assured.
• Money market account interest rates are more established compared to money market unit trusts. Although money market account rates may differ, they seldom change unless the chief borrowing rate is altered.


Disadvantages of Money Market Accounts
The money you invested is incorporated into the assets of the bank. While the bank is required to pay back your capital and the guaranteed returns, if the bank closes down, you are set to lose all or a portion of your investment, which is highly dependent on the degree to which the collapsed banks liabilities exceeded the assets.

High interest money market accounts are directed towards traditional investors who want to have minimal risks with their investments. They are also suited for people who want to gain interest to either They are also suitable for people who want to earn interest to either support their income or generate some income.

Most banks provide high interest money market accounts. It is best to look around because the interest rates and the lowest investment value differ among banks.


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