5 min read

    Are Money Market Accounts Safe?

    By Wasatch Peaks on March 27, 2023

    Topics: Business

    If you’re a north Utahn who is just starting to save, keeping your hard-earned money safe is your top priority. We explain why a money market account is among the safest choices you can make and answer some common questions, like “Is a money market account FDIC insured?”

    Money Market Accounts Put Money to Work—Safely

    If you’re ready to make your cash go a little further, but don’t want it out of reach, it might be time to consider opening a money market account.

    Let’s take a look at what a money market account is and why it’s a great choice for people ready to start setting money aside for the future. Concerned about whether your money will still be in good hands? We’ll consider some common questions about that, like:

    • How safe are money market accounts? 
    • Are money market accounts insured by the FDIC?
    • What is the FDIC or the NCUA?

    Read on to learn more about why a money market account might be the right choice for you.

    What Is a Money Market Account?

    A money market account is a deposit account held at a bank or credit union that offers a higher interest rate on balances than most checking or savings accounts.

    Money market accounts offer the same level of security as savings or checking accounts, but limit access to your funds to a maximum of six withdrawals or deposits a month. This allows banks or credit unions to pay dividends at a higher annual percentage yield (APY) on money market deposits.

    Different money market accounts are designed to meet different savings goals. Wasatch Peaks Credit Union, for example, offers a Money Market Savings Account with tiered interest rates, meaning you earn more dividends the more you have invested.

    Are Money Market Accounts Safe?

    Money market accounts usually offer a significantly better APY than most savings accounts but without many of the risks usually associated with stock or mutual fund investments. In fact, money market accounts are among the safest investments you can make. Here’s why:

    Federally Insured

    As with all conventional deposit accounts, funds invested in a money market account are insured by the federal government through two special agencies. The Federal Deposit Insurance Company (FDIC) insures those accounts held at banks while the National Credit Union Association (NCUA) insures accounts held at credit unions.

    In either case, both your original deposit and any dividends are fully insured up to a limit of $250,000 per account.

    No Market Exposure

    Unlike investments in mutual funds, stocks, or bonds, money market deposits are not exposed directly to the stock market. Instead, earnings are tied to the interest rates set by the Federal Reserve. There’s almost no risk of losing either your original investment or earnings.

    Instant Access to Funds

    Unlike almost any other investment, a money market account offers you instant access to your cash at any time should you need it (subject to monthly transaction limits). You can invest with the confidence that you’ll have cash back in your hand within minutes at no additional cost.

    By contrast, a certificate of deposit locks up your money for weeks to years, and cashing out a stock or mutual investment typically takes several days and generally involves additional fees and taxes.

    Is a Money Market Account Right for You?

    A money market account is a great place to start saving while keeping your cash within easy reach in case of an emergency or an unforeseen expense you need to pay. It’s also a great choice if you want to save money but you can’t afford to set aside significant amounts from your budget.

    While there are other secure choices that might offer a somewhat higher APY, a money market account is your go-to choice if keeping funds available is a priority. With that in mind, consider a money market account if you are:

    • Looking to build an emergency fund or cushion to protect yourself and your family from unexpected financial shocks
    • Saving towards short to medium-term goals like a car down payment, holiday expenses, or a vacation
    • Looking for a place to temporarily stash cash before committing it to a longer-term investment like a college savings account or mutual fund.

    Pros of Money Market Accounts

    Let’s take a moment to review the specific advantages that money market accounts offer compared with other bank account and investment options.

    Money market accounts offer:

    • Instant access to cash (within monthly transaction limits)
    • Federally insured deposits
    • Higher interest rates than most savings accounts
    • Convenience and features of a deposit account

    Cons of Money Market Accounts

    At the same time, it’s important to be aware of some potential disadvantages of money market accounts. These include:

    • Limit of six withdrawals or deposits per month
    • Many accounts have higher minimum balance requirements than checking or deposit accounts
    • Many accounts have higher fees or charges than checking or savings accounts
    • Interest rates are generally far lower than most mutual funds or stock market investments

    Aim High With Wasatch Peaks Credit Union

    Northern Utah is a great place to put down roots and build something special. Our people value hard work, serious play, and a focus on the future. Invest in yourself and your family with a Wasatch Peaks Money Market Savings Account.

    Keep your hard-earned cash available while reaping the benefits of our tiered-rate interest structure—the more you put in, the more you get out.

    • Withdraw money up to six times a month
    • Earn dividends calculated daily and compounded monthly
    • Fully insured up to $250,000 by the NCUA
    • Enjoy great local service and membership perks.

    Click below to learn more about opening a Money Market Savings Account at Wasatch Peaks. It’s a great place to start something special.

    See Our Money Market Account Options & Benefits

    Wasatch Peaks

    Written by Wasatch Peaks