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Can money market accounts lose money?

A money market account is a type of savings account that is interest-bearing. Money markets are available from credit unions, traditional banks, and online banks. 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.

At Credit Union of Southern California (CU SoCal), we make it easy to open a money market account!
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our mortgages, home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.

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What is a money market account?

A money market account is a type of savings account offered by credit unions and banks. Money market accounts are sometimes called money market deposit accounts or money market savings accounts. Money market interest rates tend to be higher that most savings account interest rates, which makes money markets a good choice if you have a large sum of money that you need access to.

Money market eligibility requirements

Typically, anyone can open a money market account. Each financial institution has its own unique rules and requirements. Credit unions will require that you become a member first, by opening a checking account.
You will be asked to complete an application and provide basic identification including name, address, phone number, and proof of identification (such as a driver license).
Once you are approved you can fund your account. Most financial institutions have minimum balance requirements, so be sure to ask for details on balance requirements and fees before you open an account.

Is it possible to lose money in a money market account?

There are few risks of money market accounts. The primary way a money market account could lose of money is if the account is charged fees, due to the account holder not adhering to the financial institution’s rules and conditions of the account. All financial institutions charge penalty fees for not maintaining the minimum required balance.
Most financial institutions limit the number of withdrawals that you can make each month. If you exceed the allowed number of withdrawals, a penalty fee will be charged. If you are charged these types of fees then you will lose more money that the interest gained on the account can make up for.

How do money market accounts compare?

Each of these account types was created to serve a unique financial purpose. Most people have one or more of each type of account to meet varying financial needs. Here’s home the various types of accounts compare.

Money market account vs. regular savings accounts

A money market is ideal if you want to earn a higher interest rate, and don’t need to make numerous withdrawals each month. A regular savings account may earn less interest than a money market or CD but is fully liquid and can be used as overdraft protection for a checking account.
Money market account vs. certificate of deposit (CD). A money market may earn a lower interest rate, but the money is more liquid than a CD. A CD requires that the money deposited in the account is locked for a fixed period of time during which it earns a high interest rate.
Money market account vs. money market fund. A money market account is a type of savings account that provides liquidity and earns interest on the principal. You cannot lose the balance of a money market account, although penalty fees may be charged for not meeting balance and withdrawal requirements. A money market fund is a type of investment account that invests in funds that may gain and lose value, meaning you could lose part of your initial investment.
Money market account vs. checking account. A money market account is a type of savings account that does not come with checking privileges. A checking account is specifically for managing earnings and income and paying bills and other expenses.

Which savings account is right for me?

With several types of savings account available, you may choose to have one or more types of these accounts.

When to choose a money market account

Money markets are ideal if you need to keep your money liquid. These accounts tend to offer higher interest rates than regular savings accounts, and lower interest rates than certificates of deposit (CD). They include tiered infest rates, meaning the larger the balance you maintain the more interest you earn.

When to choose a regular savings account.

A regular savings accounts is typically used for managing funds that are less likely to be used for paying bills or needed for long-term investment. A savings account is ideal for setting aside money for special purchases, such as a home, a wedding, a new car, a vacation, etc.

When to choose a certificate of deposit (CD).

Because CDs require that your money be locked-into the account for a fixed period, you need to make sure you won’t need the money right away. Choose a CD if you have a steady income, can cover your monthly expenses with ease, and will not need extra cash on-hand. CDs earn higher interest than money markets and regular savings accounts. Short-term CDs of three, six, or nine months are available, so you can earn higher interest without tying up your money for too long.

Are money market accounts safe?

Yes. All money market accounts are FDIC/NCUA insured. Accounts held at a bank are insured by the Federal Deposit Insurance Corporation (FDIC). Accounts held at a credit union is insured by the National Credit Union Administration (NCUA).
Both FDIC and NCUA insure money market accounts up to $250,000. It’s important to note that the deposit insurance amount of $250,000 is provided per depositor, per FDIC-insured bank, per ownership category.
Because all deposits are insured from bank failure, it is uncommon to lose money in a money market.

Are money market accounts worth it?

Choosing a savings account is a personal financial matter and only you can decide which type of account will meet your financial needs today and your future financial goals.
Money market accounts are popular because of the ability to earn higher interest than a regular savings account.

Why savvy consumers choose CU SoCal

For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.

Get Started on Your Money Market Account Today!

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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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