Are Money Market Accounts FDIC-Insured?

Money market accounts work like a blend of a savings and a checking account. They come with the potential to earn higher interest rates, but may also let you write checks. Luckily, these accounts are FDIC-insured, which keeps your money safe in the event of a bank failure.

Consider working with a financial advisor as you explore ways to manage the more liquid portions of your portfolio.

Are Money Market Accounts FDIC-Insured?

Yes, money market accounts do receive FDIC insurance up to the legal limit of $250,000. Note that this limit applies on a per-depositor, per account category and per-bank basis.

This means that if your total balances in specific account categories at a certain bank ever reach higher than this limit, only the first $250,000 will receive FDIC coverage for each individual category. These categories include single accounts, joint accounts, trust accounts, corporate accounts and more. Note that these do not necessarily delineate between savings, checking or money market accounts, but rather by account ownership status.

What Does FDIC Insurance Mean?

The FDIC is an independent agency of the U.S. government that protects the money you place in a deposit account with a bank or other financial institution. This insurance is put into place to protect you and your money in the event that your financial institution should fail. FDIC insurance doesn’t cover identity theft or fraud, however.

If your bank should fail, the FDIC will pay insurance to you, usually within a couple of business days. One way the FDIC will get you your money back is by opening a new account for you at another insured bank with the same insured amount you had at the failed bank. The FDIC could also choose to send you a check for the insured balance you had in your account at the failed bank.

Note that the FDIC doesn’t insure deposits with a credit union. Instead, credit unions fall under the National Credit Union Administration (NCUA) insurance guidelines. The rules are fundamentally the same, though: The NCUA’s National Credit Union Share Insurance Fund insures up to $250,000 of your total deposits at a given bank.

Money Market Accounts vs. Money Market Funds

Despite their almost identical names, money market accounts and money market funds are not the same thing. A money market fund is a mutual fund rather than a deposit account. It allows you to invest in short-term debt securities, including US treasury bills. So while it offers the liquidity and low risk of a money market account, a money market fund is an investment product, not a deposit product, and therefore can’t receive FDIC coverage.

Other investment products that are not under FDIC insurance include annuities, mutual funds, stocks, bonds, government securities and municipal securities.

Bottom Line

Money market accounts offer a great addition to your financial accounts for their flexibility and high interest rates. Some offer higher rates than even the best online savings accounts, which allows you to boost your savings even more. And with FDIC insurance, you’ll always know that your growing savings has a backup. Just keep the legal $250,000 limit in mind as your savings continue to increase.

Tips on Managing Your Money

Nowadays, most banks qualify for FDIC insurance. Still, it’s important to double-check what kind of securities and protections your bank has in place. Since FDIC insurance doesn’t cover fraud or identity theft, you may also want to ask your bank how it will protect you in those events.
If you have more than $250,000 in cash within the same account category, don’t forget that FDIC insurance doesn’t apply to the excess amount if it’s all at one bank. So to get the most coverage, consider opening a savings account or other deposit account at another FDIC-insured bank.
If you want to set up a financial plan for the future, a financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.