What's a money market account?

A money market account is like a savings account on steroids -- the initial balance requirement usually starts around $500 and goes to more than $2,500. Most banks and financial investment houses like Merrill Lynch offer these accounts, and they’re happy to offer you a higher interest rate for trusting them with a larger sum of money than people keep in their regular low-minimum-balance savings accounts. They’ll also offer you the ability to access your money at any time and write checks on your account, but they may charge for these services.

The more money you put into a money market account, the higher the interest rate you’ll get. So if you’ve got $10,000 and you want to put it in the bank, getting a money market account is a better deal than just plopping the dough in your regular savings account. But, then again, if you have $10,000, there are lots of other ways for you to invest the money that come with even higher interest rates, like CDs, bonds, Treasury bills, or mutual funds.

-- The Nest Editors

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