Yes. Like other deposit accounts, money market accounts are insured by the FDIC and NCUA up to $250,000 for each account holder. Money market mutual funds, however, are not federally insured. These are offered by brokers and other entities that are not banks or credit unions.
Money market funds are offered by investment companies and others. Money market funds are not insured by the FDIC or the NCUA, which means you could possibly lose money investing in a money market fund.
Unfortunately, mutual funds—like investments in the stock market—are not insured by the Federal Deposit Insurance Corporation (FDIC) because they do not qualify as financial deposits.
Since money market funds are investment products, they're not insured against loss by the FDIC or NCUA. Your investment could lose money.
Key Takeaways. Both money market accounts and money market funds are relatively safe. Banks use money from MMAs to invest in stable, short-term, low-risk securities that are very liquid. Money market funds invest in relatively safe vehicles that mature in a short period of time, usually within 13 months.
If you want to earn a higher APY and you can meet a higher account minimum, a money market account is a good choice. It's also a smart option for people who need easy access to their money. If you know that you won't need the money for a while, and you want to earn an even higher APY, a CD works well.
Pros of CDs
Because the financial institution holds your money for a specific length of time, CDs typically offer higher interest rates compared to traditional savings accounts and some may offer higher interest than money market accounts. And the longer your CD term, the higher your interest rate is likely to be.
Money market accounts often have a minimum deposit or balance requirement that is higher than regular savings accounts. But they tend to offer higher returns, which are more on par with money market funds. The interest rates an account offers may vary, depending on the amount of money you hold in your account.
Bonds carry more risk than money market funds. A bond's lender may not be able to make interest or principal payments on time, or the bond may be paid off early with the remaining interest payments lost.
Although a money market fund seeks to preserve the value of an investment at $1 per share, it cannot guarantee it will do so. Investment in this Investment Option is not insured or guaranteed by the FDIC or any other government agency.
A money market fund is a low-risk and highly liquid investment asset — specifically, a mutual fund — while a money market account is a type of interest-bearing account offered by a bank or credit union.
Money market accounts usually allow you to write checks and use ATM and debit cards for withdrawals, just like checking accounts. With a savings account, you typically have ATM access but can't write checks. You may need to take money out via electronic transfer or by calling the bank.
Key Takeaways. Money market investing can be very advantageous, especially if you need a short-term, relatively safe place to park cash. Some disadvantages are low returns, a loss of purchasing power, and that some money market investments are not FDIC insured.
Six to 12 months of living expenses are typically recommended for the amount of money that should be kept in cash in these types of accounts for unforeseen emergencies and life events.
Deposits in checking, savings, money market and certificate of deposit accounts are insured up to $250,000 per depositor, per ownership type.
What is the safest investment for seniors? Treasury bills, notes, bonds, and TIPS are some of the safest options. While the typical interest rate for these funds will be lower than those of other investments, they come with very little risk.
Money market deposit accounts are a type of savings account offered by banks and credit unions. The Internal Revenue Service requires account holders to pay tax on interest earned on money market accounts and other types of interest-paying deposit accounts.
The U.S. Federal Reserve and terrible disasters are the two main causes of decreases in the interest rates on money market investments. The Fed lowers short-term interest rates to spur the economy out of recession.
Because money market funds are considered to be safer than other investments such as equities, long-term average returns on money market funds may be lower than long-term average returns on riskier investments.
The money market is defined as dealing in debt of less than one year. It is primarily used by governments and corporations to keep their cash flow steady, and for investors to make a modest profit.
Capital One no longer offers any money market accounts. But if you're looking for an interest-bearing account, check out Capital One's 360 Performance Savings account or compare other money market accounts to find the best one for you.