As noted by J.D. over at GetRichSlowly.org, money market accounts are often not very well-understood. For some savers, the question arises in a quite blunt format:
“Why should I bother with a money market account?”
Especially for people who already have a savings account and a checking account, a money market account can seem like an extra account that doesn’t have much value. However, upon closer inspection, one can see why money market accounts have a loyal following among conservative investors.
Less Liquid Than a Checking Account
One main reason to use a money market account is to not have easy access to your money, so that you can save more of it and spend less of it. Many money market accounts achieve this purpose by carrying restrictions on how many withdrawals you can make per month, or with a minimum balance requirement that prevents withdrawals.
A checking account, by contrast, exists to be spent in the eyes of most consumers.
More Liquid Than a CD
Another advantage of a money market account that makes it a valuable part of the saver food chain is that it renders your money more accessible than a CD, which is locked up for a set period of time. If you search for the best rates on money market accounts, you can get a good interest rate without losing access to your money.
The “middle ground” offered by money market accounts will not be right for every saver, but there are nonetheless definite reasons why this product is popular with many conservative investors.
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