Q&A: Are Money Market Accounts FDIC Insured?

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Q: I found a money market account that pays a pretty good interest rate, but I’m worried my money won’t be safe. Are money market accounts FDIC-insured like regular savings accounts?

A: It’s easy for depositors to confuse a money market fund vs. money market account. Understanding the difference is very important, however, because one is insured by the Federal Deposit Insurance Corporation while the other is not.

A money market account — sometimes called a money market deposit account or MMDA for short — is protected by the FDIC. On the other hand, a money market fund (MMF) is not. While the two have many similarities, money market accounts are traditional bank accounts that fall under the protections of federal deposit insurance, while MMFs are considered market securities, and therefore, aren’t insured.

Understanding FDIC Insurance Limits

FDIC insurance protects the funds in deposit accounts at banks (such as savings accounts, certificates of deposit and, of course, money market accounts). Currently, insurance is limited to $250,000 per depositor, per institution. That means if you have more than one bank account with an institution, the FDIC will insure your combined balances up to $250k — not $250k per account.

Additionally, money market accounts held at credit unions are also federally-insured in most cases. However, the NCUA, rather than the FDIC, backs these funds.

Note that not all financial institutions are federally-insured. Before opening a money market account, it’s important to verify the bank or credit union is either FDIC- or NCUA-insured.