Answers to 5 common questions about money market accounts and how they work.

Money market accounts are one of the most popular ways to save money that you need access to in the short term. If you’re new to these interest-bearing accounts, here are answers to five of the most common questions about money market accounts.

What is a money market account and how does it work?

A money market account offers a way to save and earn more interest than a traditional savings account. It differs from a savings account in three key ways:

• There is usually a minimum deposit amount (at Consumers, you can open a money market account with as little as $2,500)
• Interest yield is higher
• The number of transactions you can make each month may be limited (with a Consumers money market account you can make unlimited deposits and withdrawals)

When considering a money market account you may encounter a similar-sounding product: a money market fund. These are completely different. A money market fund is an investment account, not a savings account.

Is a money market account FDIC insured?

Yes, money market accounts at banks are backed by the FDIC; those at credit unions, including Consumers, are backed by the NCUA. This means that savings in each of your deposit accounts are insured up to $250,000. Deposit accounts include money market accounts as well as savings, checking and CD accounts.

Do you pay taxes on money market account earnings?

Interest generated by a money market account is considered taxable interest income. Any year that interest is more than $10 you’ll receive a 1099 INT interest income statement at year-end. The income will need to be reported on your income tax return.

Can you withdraw money from a money market account?

One of the key advantages of money market accounts is that while generating interest they allow convenient access to your money. Most financial institutions allow online transfers, checks, a debit card or in person withdrawals. At Consumers, we offer all four methods so you can bank how you want.

How can I open a money market account?

Opening a money market account is simple. At Consumers, you can open an account in person at any of our offices, or set up your money market account online.

If you have other money market account questions you’d like answered, call us at 800-991-2221.

 

Federally insured by NCUA