How Money Market Accounts Work
A money market account (MMA) is a type of savings account offered by banks and credit unions that typically pays higher interest rates than regular savings accounts. MMAs often require a higher minimum balance but provide FDIC insurance up to $250,000.
Compound Interest Formula
A = P × (1 + r/n)^(n×t)
Where:
A = Final balance
P = Principal (initial deposit)
r = Annual interest rate (decimal)
n = Compounding periods per year
t = Time in years
Interest Earned = A - P
Money Market vs. Regular Savings
| Feature | Money Market | Regular Savings |
|---|---|---|
| Typical APY | 3.5% – 5.5% | 0.1% – 0.6% |
| Minimum Balance | $1,000 – $10,000 | $0 – $300 |
| FDIC Insured | Yes (up to $250K) | Yes (up to $250K) |
| Check Writing | Sometimes | No |
| Debit Card | Sometimes | No |