An overview of money market accounts
An overview of money market accounts
An overview of money market accounts
When most people think about the activities, how to manage, control and think of savings accounts, CDs and mutual funds or stocks. Sure, everyone has a place in your portfolio. The problem is that current accounts and savings) will be focused on liquidity and cash needs for the duration of short duration (eg, checks, debit card, etc.. There is such a range of high interest rate.
On the other hand, mutual funds and stocks offer a higher rateReturn, but also a lack of liquidity. You can redeem the shares if you want, but you can do with a loss.
money market accounts (or MMAS) offer a valuable means. You can not as sexy as the latest high-flying stocks, but have suggested a more conventional control and savings accounts. There are also liquid. In fact, often you can write checks against them.
Below we will give a brief explanation of how MMASWork that involves potential risks, and why you might want to take advantage.
How it works
Money markets are based on the principle of saving. Typically, you will earn in interest rates in the control of your savings you in your. You also earn higher interest rates on your savings into your MMA of you (most of the time). To understand why we should appreciate what do banks with their deposits.
The banks accept deposits and pay your agreedgiven interest rate. Then, a loan for your deposits to other customers for auto loans, mortgages and other purposes, and upload it to a higher rate. They generate revenue through difference. The banks expect to take into account money from your MMAS less often than your bank account. As a result, they can afford to offer more interest.
To keep you on your business money market, banks often apply a small fee for each withdrawal over a certain monthly limit.
Potential risks
to be held in contrast to mutual funds and stocks, your assets in your MMA insured by the FDIC. Even if the bank were to withdraw from business, your money is guaranteed. Consequently, there is no risk of loss.
In addition to the money markets is not an appropriate product for all banks. If you log your daily cash withdrawals or find more month to do, you should consider, at a savings> Current Account. On the other hand, if you ever need more access to your assets, you should consider a certificate of deposit (less liquidity and higher interest rates).
Money markets are a valuable product, the bank closes the gap between the need for immediate liquidity and higher yields. For the right customer, can be a perfect vehicle for cash management experience.
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