Jane Dotson
Money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). The FDIC is an independent agency of the US government that protects bank depositors against losses if an FDIC-insured bank fails. The NCUA is a government agency that performs a similar function for credit unions. Money market accounts are insured up to $250,000 per depositor, per institution, per account category, and joint accounts are insured for up to $500,000. However, money market funds, which are a type of mutual fund, are not insured.
| Characteristics | Values |
|---|---|
| Type of Account | Money Market Account |
| Insured by | Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) |
| Insured Amount | Up to $250,000 per depositor, per institution, per account category |
| Joint Account Limit | $500,000 |
| Account Type | Deposit Account |
| Account Issuer | Banks or Credit Unions |
| Account Features | Check-writing, Debit Card Transactions, Interest-bearing |
| Not Insured | Money Market Funds |
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What You'll Learn
Money market funds are not insured
Money market funds are a unique type of mutual fund that can be purchased through a brokerage firm or a mutual fund company. They are considered investments and, as such, are not federally insured. Money market funds are distinct from money market accounts, which are insured deposit accounts.
Money market accounts are a type of deposit account typically offered by banks and credit unions. They are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). The FDIC is an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event of an FDIC-insured bank failure. Similarly, the NCUA regulates and insures customer deposits at federal credit unions.
Money market accounts offer benefits such as earned interest, check-writing capabilities, and insured deposits. These accounts are considered a safe place to grow your savings as they are backed by federal deposit insurance. They are excellent options for building an emergency fund, vacation savings, or other short-term financial objectives.
In contrast, money market funds invest in assets, typically short-term, minimal-risk securities, and high-quality investments. While these funds seek to preserve the value of your investment, there is a risk of losing money. The lack of federal insurance means that there is no guarantee that you will receive $1 per share when you redeem your shares.
It is important to distinguish between money market accounts and money market funds, as only the former provides the protection of federal deposit insurance.
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FDIC insurance doesn't cover all accounts
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event that an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government. FDIC deposit insurance covers <$250,000 per depositor, per FDIC-insured bank, for each account ownership category.
FDIC deposit insurance only covers certain deposit products, such as checking and savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs). Investment products that are not deposits, such as mutual funds, annuities, life insurance policies, and stocks and bonds, are not covered by FDIC deposit insurance. Prepaid cards that are registered with the card issuer are insured when specific FDIC requirements are met. The funds underlying the prepaid cards must be deposited in a bank. FDIC deposit insurance coverage only applies when a bank fails; it does not apply to lost or stolen prepaid cards or if the prepaid card provider declares bankruptcy.
If you have a single ownership account at an FDIC-insured bank and a joint ownership account with one or more people at the same bank, you will be insured for up to $250,000 for your single ownership account deposits and $250,000 for all of your joint ownership account deposits. If you're looking to open a money market account at an FDIC-insured bank, you can check several places for this information: look for FDIC or NCUA signs in branches notifying customers of the availability of insured accounts, or use the FDIC's BankFind tool.
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NCUA insurance has deposit limits
The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) provide deposit insurance. The FDIC covers bank accounts, while the NCUA covers credit union accounts. The FDIC was established to protect bank depositors against losing their insured deposits in the event of a bank failure. Similarly, the NCUA was established by Congress in 1970 to insure member share accounts at federally-insured credit unions.
Both the FDIC and NCUA have deposit limits of $250,000 per depositor, per financial institution, per ownership category. This means that if you have more than $250,000 in your account, you may not be able to recover all your funds if your bank or credit union fails. To protect more substantial amounts, you can open accounts at multiple institutions or divide your accounts into different categories. For example, you could open a joint account or an IRA account, which are covered separately.
It is important to note that not all financial institutions provide FDIC or NCUA insurance, so it is advisable to verify a bank's membership. Additionally, certain types of investments, such as stocks, bonds, mutual funds, and life insurance policies, are not insured by the FDIC or NCUA, even if they are offered by a federally-insured bank or credit union.
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Uninsured funds may be recoverable
Money market accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). These accounts are insured up to $250,000 per depositor, per institution, per account category. If you co-own a money market account, each of you is insured for $250,000 on the account, totalling $500,000.
However, money market funds, which are a type of mutual fund, are not insured by the FDIC. These funds are investment products and are not the same as money market accounts.
If you have uninsured funds in a money market account (i.e. funds above the insured limit), you may still be able to recover some portion of these funds from the proceeds of the sale of the failed bank's assets. This process can take several years, and depositors with uninsured funds will usually receive periodic payments on a pro-rata "cents on the dollar" basis.
It is important to note that deposit insurance only applies when a bank fails. It does not cover lost or stolen prepaid cards or if the prepaid card provider declares bankruptcy. To ensure your funds are insured, place your money in a deposit account at an FDIC-insured bank and ensure that your deposit does not exceed the insurance limit for that ownership category.
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FDIC insurance is automatic
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that provides deposit insurance to depositors in American commercial banks and savings banks. FDIC insurance is backed by the full faith and credit of the United States government. FDIC insurance is automatic for any deposit account opened at an FDIC-insured bank. Bank customers don't need to apply for or purchase deposit insurance.
FDIC deposit insurance covers deposit accounts, which include checking accounts, negotiable order of withdrawal (NOW) accounts, savings accounts, money market deposit accounts (MMDAs), time deposits, certificates of deposit (CDs), and outstanding cashier's checks. These accounts are insured up to USD $250,000 per depositor, per FDIC-insured bank, per ownership category. The FDIC only insures your money if it is in a deposit account at an FDIC-insured bank.
Money market accounts are insured by the FDIC or the National Credit Union Administration (NCUA). If you just have one money market account at an institution, it is protected up to $250,000. If you co-own a money market account with another person, each of you is insured for $250,000 on the account for a total of $500,000.
It is important to note that not all financial products are insured by the FDIC. Investment products that are not deposits, such as mutual funds, annuities, life insurance policies, stocks, bonds, and money market funds, are not covered by FDIC deposit insurance. Prepaid cards are also not insured by the FDIC unless certain requirements are met.
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Frequently asked questions
Money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). The FDIC is an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event of an FDIC-insured bank failure. The NCUA is a government agency that performs a similar function for credit unions.
Money market accounts are insured up to $250,000 per depositor, per institution, per account category. For joint accounts, the limit is $500,000.
Money market funds are not insured. Money market funds are a unique type of mutual fund that can be purchased through a brokerage firm or mutual fund company.
