Are money market deposit accounts (MMDAs) FDIC insured?
The Federal Deposit Insurance Corporation (FDIC) insures banks only. FDIC deposit insurance covers certain deposit products, including money market deposit accounts, checking and savings accounts, and certificates of deposit (CDs).
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Read on to learn more about whether all money market accounts FDIC insured.
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What are money market accounts?
A money market account is a type of savings account offered by credit unions and banks. Money market accounts are sometimes called money market deposit accounts or money market savings accounts.
How do money market accounts work?
These accounts typically pay higher interest than regular savings accounts, which is a great advantage if you meet the minimum balance requirement. Some credit unions and banks will provide a debit card and/or checks to make account transactions easier and more flexible.
Like other types of bank account, you can make deposits whenever you’d like. However, money market accounts may have some rules about withdrawals.
Prior to 2020, the Federal Reserve created a limit of six withdrawals from certain types of accounts. Although the requirement was removed, some credit unions and banks have kept the restrictions in place. Therefore, before you commit to a money market account, speak to a representative at the financial institution of your choice about the withdrawal rules that may be imposed on your account.
If a transaction limit is in place, then you may not be allowed to withdraw money or make payments more than six times a month from a money market account by check, debit card, draft, or electronic transfer.
Withdrawals or payments by ATM, in person, by mail, messenger, or telephone check (where payment is made by using your checking account number and bank routing number) typically do not count against the six-transaction limit.
Your bank or credit union may also have a minimum deposit that it requires to open a money market account.
A money market account is different from a money market mutual fund, or a money market fund. Money market funds are offered by investment companies and others. Money market funds are not insured by the FDIC or the NCUA, which means you could possibly lose money investing in a money market fund.
Money markets are a sound financial tool for saving money when you need to have quick, easy access to your funds.
Are money market accounts insured?
Yes. All money market accounts are insured. If the account is held at a bank it is insured by the Federal Deposit Insurance Corporation (FDIC). A money market at a credit union is insured by the National Credit Union Administration (NCUA).
Both FDIC and NCUA insure money market accounts up to $250,000.
It’s important to note that the deposit insurance amount of $250,000 is provided per depositor, per FDIC-insured bank, per ownership category.
What does it mean to be FDIC / NCUA insured?
The FDIC is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection, in addition to other responsibilities.
The National Credit Union Administration (NCUA) is an independent agency created by the U.S. government to regulate and protect credit unions and their owners.
Is there a limit to how much the FDIC / NCUA will insure?
According to the FDIC, FDIC deposit insurance protects bank customers if an FDIC-insured depository institution fails. Deposit insurance is calculated dollar-for-dollar, principal plus any interest accrued or due to the depositor, through the date of default. For example, if a customer had a CD account in her name alone with a principal balance of $195,000 and $3,000 in accrued interest, the full $198,000 would be insured.
Can I have multiple MMDAs insured?
Yes, it is possible to have multiple MMDAs insured. Both FDIC and NCUA provide $250,000 per depositor (i.e., per individual), per bank, per account category. For example, if you have more than $250,000 deposited in a particular bank, and you want to open a second MMDA account you would need to open the second account at a different bank or credit union in order to have the accounts insured.
Do I have to apply for FDIC / NCUA insurance?
No application is necessary all bank customers and credit union customers are automatically protected and don’t need to purchase deposit insurance.
What accounts are not insured?
According to the FDIC, there are several non-deposit investment products that are not insured by the FDIC, even if they were purchased from an insured bank or credit union. These include:
- Stock investments
- Bond investments
- Mutual funds
- Crypto Assets
- Life insurance policies
- Annuities
- Municipal securities
- Safe deposit boxes or their contents
- U.S. Treasury bills, bonds, or notes (These investments are backed by the full faith and credit of the U.S. government.)
The value of stocks, bonds, and other securities fluctuates with market conditions; no one can guarantee that you’ll make money from your investments, and they may lose value. Each consumer should take into consideration their own financial goals, risk tolerance, and other factors when making the decision to purchase or invest in a non-deposit product.
Are money market accounts worth it?
Depending on your financial goals, money market accounts could be a great choice for you. Financial transactions are an essential part of everyday life, and having a money market account means you’ll earn more interest on your money while keeping it accessible.
CU SoCal’s
Money Market Savings Account will make the most of your deposits with higher tiered dividends while offering convenient access like a checking account.
Why savvy consumers choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including
mortgages,
Home Equity Loans,
HELOCs,
car loans,
personal loans,
credit cards, and other banking products, to those who live, work, worship, or attend school in
Orange County,
Los Angeles County,
Riverside County, and
San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.
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