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What are money market accounts?

Money market accounts are the United States version of the UK's National Savings and Investments. These accounts invest in the government and in return they are paid interest, which is usually based on the going market rate for interest. People who have money market accounts are usually paid high-rates of interest, however they do have to maintain a minimum balance in the account, which can be quite high. The accounts are also subject to charges, which are usually charged if the customer wishes to withdraw money before term or if they drop below the minimum required balance in their agreement.

In the United States, their savings accounts are treated in the same manner as a current account or a checking account as it is also known. Bank law states that interest cannot be paid on a checking account, this is known in the financial world as Regulation Q. This regulation is basically a work around so money market accounts can still claim interest. Because the money market accounts are not recognisd as official checking accounts due to over a dozen restrictions, the account holders are allowed to receive interest. This is even though this kind of account is patently a checking account.

You are unable to make more than six withdrawals a month on money market accounts. And anything you do take out must not take the account balance below what you have agreed to keep in your contract. If you exceed more than six withdrawals you will face having to pay a penalty fee, which in some cases can be over $150. If you continue to make withdrawals on your money market accounts, the bank may even consider closing your account altogether.

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