A money market account (MMA) or money market deposit account (MMDA) is a deposit account that pays interest based on current interest rates in the money markets. The interest rates paid are generally higher than those of savings accounts and transaction accounts; 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 funds that invest in money market securities.
How it works
In the United States, deposit holders are permitted to write checks and use debit cards to withdraw funds from money market accounts on demand. However, for regulatory purposes, the accounts are regulated as savings accounts under Regulation D (FRB). Customers are permitted to make 6 withdrawals per month (excluding cash withdrawals from automated teller machines) and violations will result in service charges of approximately $10 per transaction and possible closure of the account.
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 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. 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.
- ^Dlabay, Les R.; Burrow, James L.; Brad, Brad (2009). Intro to Business. Mason, Ohio: South-Western Cengage Learning. p. 482. ISBN 978-0-538-44561-0.
- ^Regulation D: Reserve Requirements
- ^Gilbert, Alton, “Requiem for Regulation Q: What It Did and Why It Passed Away”, Federal Reserve Bank of St. Louis, February 1986
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.