Money Market Account Features

Features of Money Market Accounts

Like other bank services, money market savings accounts are subject to government regulations, Individual banks, however, may offer special inducements within prescribed limits. Here is a summary of the main features offered by a typical money market account:

  • Minimum investment. To open and maintain a money market savings account, a minimum of $2,500 is legally required, although some banks require a higher initial investment but thereafter sometimes permit the depositor to reduce the account to $2,500. So long as this minimum remains in the account, money market interest rates will be paid. There is usually no charge for servicing the account.
  • Interest rates. There is no maximum interest limit and rates can either be linked to some other marketplace factor such as the rates being paid by the federal government on its Treasury bills, or can be set at any other level the institution may choose. New interest rates are generally posted every seven days. Some banks pay investors a bonus for maintaining large deposits, for example, an additional 1 percent interest on accounts of $25,000 or more. However, if the average deposit in any month falls below $2,500, interest rates for that period drop to the rate the bank pays on passbook savings — usually 5 -?5.5 percent. Interest on money market savings accounts is generally compounded daily and paid monthly, and an investor who closes an account before the end of the monthly statement cycle generally loses all interest for that month.