A money market account (MMA) or money market deposit account (MMDA) is a
deposit account
A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained bel ...
that pays interest based on current
interest rates in the
money market
The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less.
As short-term securities became a commodity, the money market became a compo ...
s.
The interest rates paid are generally higher than those of
savings account
A savings account is a bank account at a retail banking, retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options and the inability to be overdrawn. Traditi ...
s and
transaction account
A transaction account (also called a checking account, cheque account, chequing account, current account, demand deposit account, or share account at credit unions) is a deposit account or bank account held at a bank or other financial instituti ...
s; however, some banks will require higher minimum balances in money market accounts to avoid monthly fees and to earn interest.
Money market accounts should not be confused with money market funds, which are
mutual fund
A mutual fund is an investment fund that pools money from many investors to purchase Security (finance), securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in ...
s that invest in
money market
The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less.
As short-term securities became a commodity, the money market became a compo ...
securities.
United States
Features
Money market accounts are regulated under terms similar to ordinary savings accounts. They are insured by the FDIC (unlike money market funds), and although they may provide checking services, the restrictions of
Federal Reserve Regulation D have discouraged their use for day-to-day payment purposes. In practice, money market accounts are distinguished from ordinary savings accounts by their higher balance requirements and their more complex interest rate structure.
History
The
Depository Institutions Deregulation and Monetary Control Act of 1980 set in motion a series of steps, designed to phase in the deregulation of bank deposits, permitting a wider variety of account types, and eventually eliminating interest ceilings on deposits. By the subsequent
Garn–St. Germain Depository Institutions Act
The Garn–St Germain Depository Institutions Act of 1982 (, , enacted October 15, 1982) is an Act of Congress that deregulation, deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage, adjustable-rate mor ...
of 1982, on December 14, 1982, money market accounts were authorized with a minimum balance of no less than $2,500, no interest ceiling, and no minimum maturity, allowing up to six transfers out of the account per month (no more than three by check) and unlimited withdrawals by mail, messenger, or in person.
[Gilbert, Alton]
"Requiem for Regulation Q: What It Did and Why It Passed Away"
Federal Reserve Bank of St. Louis, February 1986 Minimum denominations were eliminated on January 1, 1986, and the limitation that no more than three of the maximum six monthly outward transfers could be by check was eliminated on May 3, 1988.
References
Bank account
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