Pros:
- Higher Interest Rate - Bank money market deposit accounts generally pay a higher interest rate on the amount that you have in your account. The more you are able to deposit into your MMDA the more interest you will likely earn.
- Easy to track - Bank money market deposit accounts in many aspects act like your checking account. The bank sends you a monthly statement of your balance so that you can keep track of how much money you are actually saving in your MMDA.
- FDIC Insurance - Within the limits set by the Federal Deposit Insurance Corporation, your funds are protected. Currently, FDIC insurance protects you on deposits for up to $250,000. In January of 2014 this will decrease to $100,000 after the emergency bill has expired. There are some contingencies that are involved in this insurance so please make sure you understand it before you deposit amounts in excess of $250,000.
- Minimums - Because of the higher interest rates that are available on bank money market deposit accounts, there is typically a minimum deposit amount required. This amount could be as little as $500 or as high as $2,500 depending on the bank. Before you set up a bank money market deposit account make sure you find out about minimum balances.
- Limited withdrawals - Bank money market deposit accounts are intended for longer terms savings. Because of this there are typically significant limits on how many withdrawals can be made from these accounts. These limits may be imposed monthly, quarterly or annually. Before you decide to invest your savings into a bank money market deposit account, be sure you know these limits.
- Fees - In addition to the limits on withdrawals (in terms of number of times you can withdraw), there may also be fees that are associated with withdrawals. Before you decide that you want to use a bank money market deposit account for a savings vehicle make sure you understand the fees that you might pay should you need access to your funds.
