What is a Money Market
Account?
A money market account (MMA) or money
market deposit account (MMDA) is a deposit account that pays interest based on current interest
rates in the money markets A money market account is a savings account that may come
with higher interest rates than other savings accounts plus checks or a debit
card. But MMAs often require much higher minimum deposits and balances. And
although MMA interest rates have historically been higher than those of basic
savings accounts, many currently are roughly the same. So comparing rates is an essential first step when considering a money market account. 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.
A) STRUCTURE OF INDIAN MONEY MARKET
·
ORGANISED SECTOR
·
UNORGANISED SECTOR
·
ORGANISED SECTOR
Call
and Notice Money Market
•
Treasury Bills Market
•
Commercial Bills Market
• The market for Certificates of Deposits (CDs)
• Market
for Commercial Papers (CPs)
• Repos
Market
• Money
Market Mutual Funds (MMMFs)
•
Discount & Finance House of India (DFHI)
·
UNORGANISED SECTOR
|
How Money Market Accounts
Work
Money market accounts are offered at traditional and online
banks and at credit unions. They have both advantages and disadvantages
compared with other types of accounts. Their advantages include higher interest
rates, insurance protection, and check writing and debit card privileges.
Potential disadvantages include limited transactions, fees, and minimum balance
requirements
Money
Market Mutual Funds (MMMF): RBI introduced MMMFs in April 1992 to enable the
individual investors to participate in the money market. To make the scheme
flexible and attractive, RBI has brought about many modifications. The
important features of this scheme as of now are: (i) It can be set up by
commercial banks, financial institutions, and the private sector. (ii) Individual
investors, corporates and others can invest in MMMFs. (iii) Resources mobilized
through this scheme can be invested in money market instruments as well as
rated corporate bonds and debentures with a maturity period up to one year. (iv)
The minimum lock-in period is now 15 days.
Both money market accounts and
money market mutual funds offer quick access to the depositor's cash. Money
market accounts have the government-mandated six-transactions-per-month
limitation mentioned earlier, which money market mutual funds do not. The
companies that offer them, however, can place limits on how often depositors
can redeem shares or require that any checks they write be for over a certain
amount. The returns on money market mutual funds tend to be higher than those
on money market accounts.
Should I open a money market
account?
A money market account is worth considering if you’re looking for
a safe place to deposit a large chunk of money and earn some interest.
Your bank’s money
market account has a high-interest rate
You want access to funds in a pinch
You need the ability to write up to six checks per month
You want a debit card on your account that you can use up to six
times per month
You plan to deposit several thousand dollars and want the safety
of an insured account at a bank or credit union
Be sure to shop around to make
sure an MMA is the best option. High-yield savings accounts often have better
interest rates and lower minimum deposits
0 Comments