A money market account (MMA) or money market deposit account (MMDA) is a
deposit account
A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained belo ...
that pays interest based on current
interest rates
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
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 fund
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICA ...
s that invest in
money market securities.
United States
Features
Money market accounts are regulated under terms similar to ordinary savings accounts. They are insured by the FDIC (unlike money market funds), and although they may provide checking services, the restrictions of
Federal Reserve Regulation D have discouraged their use for day-to-day payment purposes. In practice, money market accounts are distinguished from ordinary savings accounts by their higher balance requirements and their more complex interest rate structure.
History
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
The Garn–St Germain Depository Institutions Act of 1982 (, , enacted October 15, 1982) is an Act of Congress that deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. It is disputed whether the a ...
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.
[Gilbert, Alton]
"Requiem for Regulation Q: What It Did and Why It Passed Away"
Federal Reserve Bank of St. Louis
The Federal Reserve Bank of St. Louis is one of 12 regional Reserve Banks that, along with the Board of Governors in Washington, D.C., make up the United States' central bank. Missouri is the only state to have two main Federal Reserve Banks (Ka ...
, February 1986 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.
References
Bank account
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