Can You Lose Your Money In A Money Market Account? (2024)

FAQs

Can You Lose Your Money In A Money Market Account? ›

Since money market accounts are insured by the FDIC or the NCUA, you cannot lose the money you contribute to the account—even in the event of a bank failure. You can, however, be subject to fees and penalties that reduce your earnings.

There is no direct way to lose money in a money market account. However, it is possible to lose money indirectly. For example, if the interest rate you receive on your account balance can no longer keep up with any penalty fees you may be assessed, the value of the account can fall below the initial deposit.

Generally speaking, money market accounts are very safe. At banks, money market account balances are insured by the FDIC, and at credit unions, balances are insured by the NCUA. Both the FDIC and NCUA insure up to $250,000 per depositor, per account ownership category per insured institution.

Many accounts have monthly fees

Another drawback to remember is that while they have high yields, money market accounts can also come with cumbersome fees. Many banks and credit unions will impose monthly fees just for the upkeep of your account.

Advantages of Money Market Accounts

For instance, some banks allow easier access to your funds by linking your money market account to a debit card. Federal regulations that govern savings account withdrawals don't apply to ATMs. So you can make unlimited ATM withdrawals from your money market account without penalty.

Like other deposit accounts, money market accounts are insured by the FDIC or NCUA, up to $250,000 held by the same owner or owners.

Your money is not bound for a predetermined duration. Instead, you can withdraw funds when needed, giving you control over your finances. So, your money is never really stuck. However, MMAs sometimes charge small penalties if your balance drops below a certain amount or you make more withdrawals than agreed.

If the interest earned is low enough and the fees for the account are high enough, you may lose money. Although money market accounts aren't subject to the ups and downs of the stock market, they may come with higher fees than other savings products.

All investments are subject to market risk, including possible loss of principal. Retail Money Market Funds: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so.

Some money market accounts require minimum account balances for the higher rate of interest. Six to 12 months of living expenses are typically recommended for the amount of money that should be kept in cash in these types of accounts as emergency funds.

Can a money market account go negative? ›

You can't. FDIC and NCUA insurance protect you against bank and credit union failures. However, balances above $250,000 in the same account, at the same bank or credit union do not receive this safeguard. Fees could potentially cause your balance to decline or go negative, just like in a checking or savings account.

Money market accounts offer flexibility with check-writing and debit cards, savings accounts are more accessible and have lower fees, and CDs offer higher interest rates but with a commitment to keep your money locked away for a set period of time. To make the best choice, consider your financial goals and situation.

Money market funds are usually considered to be safe investments, but it's important to remember that these investments are intended for the short term. With maturities of 13 months or less, the funds stay liquid and allow you better access to your money than longer-term investments.

While money market funds aren't ideal for long-term investing due to their low returns and lack of capital appreciation, they offer a stable, secure investment option for individuals looking to invest for the short term.

Money kept in money market accounts is accessible when you need it, without incurring a withdrawal penalty, as you might with a certificate of deposit. Money market accounts are available from brick-and-mortar banks and credit unions, as well as many online banks.

A money market account is neither a checking nor a savings account but has certain characteristics similar to both. Like regular checking accounts, money market accounts allow account holders to make withdrawals and transfers, and write checks.

Money kept in money market accounts is accessible when you need it, without incurring a withdrawal penalty, as you might with a certificate of deposit. Money market accounts are available from brick-and-mortar banks and credit unions, as well as many online banks.

Six to 12 months of living expenses are typically recommended for the amount of money that should be kept in cash in these types of accounts as emergency funds. Beyond that, not investing will mean missing potential earnings.

Money market funds can protect your assets during a recession, but only as a temporary fix and not for long-term growth. In times of economic uncertainty, money market funds offer liquidity for cash reserves that can help you build your portfolio.

The U.S. government does not offer insurance on any type of mutual fund. Money market mutual funds, like bond and stock mutual funds, are investments, and, as such, are not guaranteed. It is important that investors understand that.