The money market account is a bank account that is intended as a place for you to put your savings. It is an ideal option to maintain that part of your savings that needs to be kept for emergencies. A money market account comes with virtually no risk and you will have easy access to your money if you need it.
Most people are confused by what a money market account is, in large part because it seems like a savings account in some ways and a checking account in others. Technically it is a savings account however what it does with the money that you deposit is different than it is for a savings account. In the case of the money market account the bank has more investment options so it can earn a higher return than a savings account would which is why it pays a higher interest rate.
At the same time you will notice that unlike a savings account you can write checks on your money market account. However you are limited to six transactions each month. The reason for this is that it is necessary to comply with some strange banking laws that exist in the United States. In order to attract customers the banks want to make the account more convenient by allowing checks to be written. However in order to pay interest it has to be classified as a savings account rather than a checking account. The result is the limit on the number of transactions that can be made.
One thing that you need to consider if you are looking to invest in a money market account is that you are going to have to have maintain a minimum balance in order to get the best interest rate. You can take your money out any time that you want but if you drop below a minimum balance you will find that the returns drop dramatically. Therefore if you are considering one of these accounts you are going to want to make sure that you find out what the minimum balance is and realistically assess if you are going to be able to maintain it. If not you will be better off going with a savings account.
A money market account is insured so there is basically no risk, even if the bank fails you will get your money. That means that when you are looking around at banks to open an account at you really don't have to think about the risk factor of the equation. All you really have to worry about is which one pays the highest interest rate. In general you will find that the smaller banks pay better than the large well known ones. That being said most people will just open a money market account at the bank they already do business with.