There are many options available to the consumer in the form of products and services offered by banks and credit unions. Although some may opt for the more traditional route of a simple savings account, others may wish to participate in a newer form, which is known as the money market account. A money market account is very similar to a traditional simple savings account with a few subtle differences.
The money market account normally pays a significantly higher interest rate to those who hold these types of savings accounts while the traditional simple savings accounts are normally pretty low. Also, money market accounts may have stricter rules when it comes to the withdrawal of funds from these accounts. Money market investment sometimes require the consumer to deposit money into this type of account and allow the money to “season.”
Seasoning means that the money will have to sit in the account for a due amount of time before the bank or credit union will allow one to withdraw his or her money. They may also have specific rules concerning the amounts of withdrawals one may make over a given amount of time. Another difference when looking at a money market account over a traditional simple savings account is the minimum balance.
One should remember that he or she is earning a higher percentage rate in this type of account over a normal savings account. For that higher interest rate, many banks or credit unions may require a higher balance to be held in the account than they may require for a savings account. This higher balance means that if one withdraws money even for emergency situations from this account, he or she will be charged a penalty if the total balance falls below their minimum requirements. This is something one must truly consider when opening up a money market account over a traditional simple savings account.