The financial "money market" consists of buyers and sellers of short term credit. Typically short term in this market means thirteen months or less. These short term instruments are often referred to as "paper," in contrast to longer term debt such as bonds. Most of this short term lending takes place between banks. Another big participant in these markets are governments.

Money Market Deposit Accounts

When people get a "Money Market account" at their bank they often get a Money Market Deposit Account or MMDA. These accounts are treated like savings accounts in many ways, but usually earn better interest rates. Like savings accounts, they are structured to discourage their owners from withdrawing from them frequently, usually limiting them to a few transactions per month.

For most users money market deposit accounts represent a better alternative to regular savings accounts. The interest rates are typically better, and just like a savings account, they are usually FDIC insured. The only time a customer may prefer a savings account is when they have a very small amount of cash available. Money market accounts often have a higher minimum balance than a savings account.

Money Market Funds

It is important to make sure when you open an account that you are opening a money market deposit account and not a money market fund. While it would be rare for your bank to present you with the latter option, money market funds are entirely different types of investment vehicles. If you are looking for a secure place to put your money you would usually look to a money market deposit account before a money market fund.

Highest Money Market Rates

Finding a good money market account can be difficult. This is particularly true because money market rates can fluctuate greatly. While a bank may be giving great interest when you open your account, that interest rate is subject to change, sometimes drastically. In order to maximize your returns you should shop around, including on the Internet, and keep an eye on your interest rate. If you become unhappy, let your bank know, and don’t hesitate to move your money to an account that can offer better returns.