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A money market savings account (MMSA, also MMA) is quite similar to a regular savings account, with a few subtle differences. Most traditional banks and online institutions offer both savings accounts and money market accounts to their customers. At first glance, these two accounts are similar in that they are deposit accounts that pay interest.
What distinguishes MMA from other savings accounts is the requirement for a higher minimum balance because it will also generate a higher interest rate compared to other savings accounts. In return, you might usually earn much better APYs (Annual percentage yields) compared to those of savings accounts.
Another feature of money market accounts is that all the money deposited is insured by the Federal Deposit Insurance Company (FDIC). This is an assurance for the account holders that even if the bank they trusted collapsed, they could still recover their money through the FDIC. Another federal agency, the National Credit Union Administration (NCUA) is responsible for insuring money market accounts issued by credit unions.
Interests offered with money market accounts are relatively higher than the regular savings account. There is also less restriction on accessing the fund, unlike the certificate of deposit (CD), where consumers have to wait for the maturity date or risk being penalized. Unlike CDs, however, interest rates for money market accounts can change monthly, so it is important for the depositor to monitor market rates before they decide to withdraw their money.
Money market accounts are just another way people can keep their money safe in banks with less risk. And just like other types of savings accounts, shopping around is the best way to get the best offer available in the market.