August 21st, 2010 | 
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A money market account is a cross between a savings account and a checking account. You can earn a higher interest rate on the money in your account that you would in a traditional savings account or checking account. You are usually required to have a higher minimum balance in an account. If you fall below the minimum amount required in your account you will incur a fee. A money market fund is better than a CD if you need to access your accounts and withdraw money without incurring a penalty. With this kind of account there is a limit to the number of transactions you can make within a certain time period.
Money market accounts give the financial world a short term liquid funding and here is how it works:
You loan money to the bank when you open a money market account. Your funds then earn a specified amount of money based on your money market interest rate. The bank then loans your funds at a higher interest rate so that it can pay you interest and still make a small profit.
The interest rate for your account is determined by what the bank thinks it can earn when it loans the funds from out of your account. I the eyes of the financial industry the money market accounts are less stable since the money from the account can be withdrawn at any given time thus making it more risky than a guaranteed investment.
To find the best market rate you have to know how the bank market account rates are determined. Before you can examine the current market rate you have to determine the most time and amount you are willing to invest.
How to choose between a bank CD and a market account is not difficult. You just have to know how much you want to deposit and how long you can let the money lay there. If there is a chance that you will need to withdraw money before the term of the CD is over than a money market account is the one you want to open.
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