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Money Market Account vs. Money Market Fund: Which is FDIC Insured?

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Short answer: While money market accounts are insured by the FDIC (or the NCUA if the account is deposited at a credit union), money market funds are not.

Long answer: Money market accounts and money market funds are often confused. Considering this, try not to confuse the two, as key differences between these accounts can impact your wealth.

What is a money market account?

Money market accounts are akin to a hybrid between savings and checking accounts.

Like savings accounts, money market accounts generate higher interest yields than checking accounts. Because the customer has limited access to funds, banks can manage these accounts at a lower cost then return the yield back to the customer. Furthermore, online banks typically generate an even higher interest yield, as their lower overhead costs allow them to provide a greater return.

Similar to checking accounts, money market accounts also provide direct access to funds. (To access funds from a savings account, customers must execute a transfer or call their bank to execute a transfer on their behalf.)

Unlike checking accounts, however, customers’ access to funds are limited. Many banks only allow up to six withdrawals during a statement cycle. (If debit cards are provided alongside the money market account, ATM withdrawals may be unlimited.) Furthermore, many banks require a minimum initial deposit.

Because the money market account is deposited at a bank, it is insured for up to $250,000 by the FDIC, per depositor (or the NCUA if deposited at a credit union). If the account has joint ownership, it is insured for up to $250,000 per co-owner.

What is a money market fund?

A money market fund is a specific type of mutual fund which allows investors to pool money in order to purchase short-term debt securities. Essentially, they are short-term loans to creditworthy governments or corporations.

Money market funds’ high-liquidity is also an attractive feature. Similar to checking or money market accounts, investors can execute withdrawals via check or wire transfer. (Before doing so, however, ensure withdrawals do not prompt a “liquidity fee.”) Furthermore, depending on which fund you choose, money market funds may also be tax-exempt.

Because of the Great Recession, money market funds have seen historically low rates. As such, the prospect of utilizing these funds has been unattractive to many investors. As the Federal Reserve continues to raise its rates, however, money market funds are sure to become more appealing.

Unfortunately for risk-averse investors, money market funds are not insured by the FDIC.

Which one is worth your effort?

That, depends, of course, on your goals.

  • If your priority is safety, consider money market accounts. They’re insured for up to $250,000 by the FDIC or NCUA and their easy accessibility makes them more attractive than savings accounts.
  • If your priority is higher returns, however, consider money market funds. While interest rates for these funds have seen a historic low, the rates will continue to increase as the Federal Reserve raises its own.

As always, be sure to consult with your financial advisor to determine the best course of action.

Protect your money with UFB Direct

If you’re looking for a safe investment vehicle with high interest yields, consider UFB Direct’s industry-leading High Yield Money Market account.

"Money Market Account vs. Money Market Fund: Which is FDIC Insured?"

This blog post was published by UFB Direct on and last updated on .

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