Are money market accounts FDIC-insured?

Interest allows you to earn money when saving for a new home or building an emergency fund. Money market accounts are one type of account that earns interest. They offer a combination of traditional savings account and checking account features, but they often require a higher minimum balance and limit withdrawals. Used wisely, money market accounts can give you a low-risk option to grow your savings with the added benefit of insurance protection on balances up to $250,000.

Are money market accounts FDIC-insured?

Yes, money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). You don't need to apply for federal deposit insurance — you get this protection automatically for deposit accounts at any FDIC-member institution.

What is FDIC insurance?

The FDIC is a government agency that helps maintain the safety of the US banking system and insures bank deposits. The NCUA regulates and insures customer deposits at federal credit unions. In the event of a bank's failure, the FDIC and NCUA guarantee that depositors' money will be protected up to certain limits.

Each customer is covered up to $250,000 per ownership category at each financial institution where they hold money. Insured amounts include your initial balance, your additional deposits and any amount of interest you earn.

The ownership categories include:

• Single accounts with one signer on the account
• Joint accounts with two or more signers
• Some retirement accounts
• Revocable and irrevocable trusts
• Employee benefit plan accounts

Money market accounts fall in the same category as checking and savings accounts, so if you have all three at one institution, your combined total balance is protected up to $250,000. If you just have one money market account at an institution, then it alone is protected up to $250,000. And if you co-own a money market account with another person and that's the only account you have at the institution, each of you is insured for $250,000 on the account for a total of $500,000.

What happens if my bank fails?

Although failures rarely occur in the modern U.S. banking system, the FDIC would step in and take action. Generally, the FDIC will assume control of the failed bank, notify the customers and develop a plan for moving forward. This means that another bank could potentially assume your money market account through a sale or transfer. Alternatively, if the FDIC can't find a bank willing to assume the failed bank's deposits, you'll be reimbursed for the insured balance of your bank account.

Examples of insured money market account balance reimbursements

For illustrative purposes, here are two scenarios showing how insured money market accounts are treated as a result of a bank liquidation or failure.

Are money market accounts insured at my local bank?

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.
• The FDIC's BankFind allows you to search for member banks in your area.
• For online money market accounts, bank websites contain information about deposit insurance.

Remember to ask a banking professional about FDIC insurance when opening a new account since not every account may qualify for coverage.

What other types of accounts are FDIC-insured?

In addition to money market accounts, the FDIC insures other types of bank deposits. You'll need to combine the total balances of these accounts, including money market accounts, when calculating your total insured amount at one bank.

Safely building your savings

Thanks to FDIC and NCUA insurance, money market accounts offer a safe place to park your money and earn interest while building an emergency fund or adding to your current savings. If you're looking to take advantage of interest, a money market account might work well for you.

With this primer, you can likely see the safety of money market accounts. As with any type of savings account, interest rates, APY and restrictions vary. Read the fine print and review account requirements. Understand your account obligations, including minimum deposit amounts, balance requirements, withdrawal limits and monthly fees.

For current options available, learn more about money market accounts at Citizens.