A money market account is one in which you will be able to invest your money and get higher interest rates than most other investment options. Keep in mind that individual banks may offer many features and benefits beyond the standard ones. However, the following are the general features of money market accounts:
1. Low levels of investment. According to law, a minimum amount of $2,500 is required. Some banks might require a higher amount. As long as this amount is in the account, the money market interest rates will continue to come in to you. On these accounts, there is generally no service charge.
2. Attractive interest rates. If you have a money market account, while the minimum investment amount is $2,500, there is no maximum limit. These interest rates could be linked to either the rates that the federal government is paying on its treasury bill, or can be set at any rate of the banks choice. There are some banks that pay their patrons a bonus if they invest large amounts of money. For example, if you invest over $25,000, you could get 1% of interest more. The reverse applies if your balance drops below $2,500 - you will get a lower rate of interest for the period during which it drops. The interest on these accounts is on daily compound interest and payments are made on a monthly basis. Therefore, if you have a money market account and if you close it before the end of the month, you lose the interest you would have accrued in that month.
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