The answer: pretty safe. Money market accounts are insured by the Federal Deposit insurance Corporation (FDIC). Just don’t confuse these accounts are offered by banks, money market funds brokerage services – not FDIC insured.
Money Market Accounts
Money market accounts can be easily opened in the banks-participants. These accounts offer higher interest rates than standard checking or savings accounts. However, the lows tend to be higher, and these accounts offer limited checks the ability due to the regulation of the Federal reserve system D, which limits withdrawals to six per month.
Users don’t need to worry about the safety of money market accounts because they are insured by Federal insurance Corporation up to the maximum amount permitted by law. In addition, banks are investing from the accounts of customers in a stable low risk vehicles, which include certificates of Deposit (CDS) and government securities.
Money Market Funds
Consumers can purchase money market funds in connection with the participation of banks, mutual Fund companies and brokerage houses. Money market Fund allows the consumer to earn interest on cash reserves in the portfolio – stray money left from the transaction, or just to keep until it can be invested in other instruments. The money market Fund invests in relatively safe funds, which include Treasury bills and CDs. High-risk money market funds may invest in commercial paper that is corporate debt, and foreign currency CDs. These holdings could lose value in a volatile market or if interest rates fall, but they can also generate more revenue.
Because they are considered to be investments and not deposits, money market funds are not insured from losses to the FDIC. However, they are covered by the U.S. Treasury, if the brokerage firm involved is not possible.