Is Money Market Insured? A Look at Accounts vs. Funds

When considering where to keep savings, many individuals encounter the term “money market” and often question its safety and insurance status. This common query arises from the existence of different financial products that share similar names but offer distinct levels of protection. Understanding these differences is important for making informed decisions about cash management. This article clarifies the insurance aspects of various money market products.

Understanding Money Market Accounts

A money market account (MMA) is a type of interest-bearing deposit account offered by banks and credit unions. These accounts are designed to provide competitive interest rates, often higher than traditional savings accounts, while maintaining liquidity. MMAs typically allow limited check-writing and debit card access, blending features of savings and checking accounts.

Customers often use MMAs for short-term savings goals or as a holding place for funds they may need to access relatively quickly. They often have restrictions, such as limits on monthly transactions or a requirement to maintain a higher minimum balance to avoid fees and earn the stated interest rate.

Deposit Insurance for Money Market Accounts

Money market accounts held at banks are insured by the Federal Deposit Insurance Corporation (FDIC), while those at credit unions are insured by the National Credit Union Administration (NCUA). This protection is automatic for deposit accounts at any FDIC-member institution or NCUA-insured credit union; depositors do not need to apply for it.

The standard insurance amount for both FDIC and NCUA is $250,000 per depositor, per insured institution, per ownership category. This coverage protects the principal amount deposited and any accrued interest, ensuring reimbursement up to the limit if the financial institution fails. For instance, a single account with $200,000 is fully covered. For a joint account with $400,000, each individual’s $200,000 portion is also fully covered under separate ownership categories.

Distinguishing Money Market Accounts from Other Investments

It is important to differentiate money market accounts from money market funds. Money market funds are a type of mutual fund that invests in short-term debt securities, such as Treasury bills, commercial paper, and certificates of deposit. Brokerage firms and investment companies typically offer these funds, not banks or credit unions.

Unlike money market accounts, money market funds are not insured by the FDIC or NCUA. While generally considered low-risk due to their underlying assets, there is a possibility of losing money, and their value can fluctuate. Investments in brokerage accounts, including money market funds, may be covered by the Securities Investor Protection Corporation (SIPC). SIPC protects against the failure of the brokerage firm itself, not against a decline in investment value. Other low-risk investments like Treasury bills are backed by the U.S. government but do not carry FDIC insurance.