FDIC insured money market accounts provide safe haven

Posted by  on Feb 05, 2010

If you're watching current mortgage rates and weighing a home purchase, keep savings for a down payment and closing costs secure with deposit accounts. A money market account insured by the Federal Deposit Insurance Corporation (FDIC) is an ideal option for placing hard-earned savings earmarked for an imminent home purchase.

Deposit Accounts Can Eliminate Risk

Although stocks and other securities have historically earned higher returns than deposit accounts such as money market accounts, that higher yield comes with greater risk. Particularly if you are close to a home purchase and are counting on your savings being there when the time comes, you'll want to reduce risk and preserve the principal. Given the bank failures stemming from the financial crisis, you might also worry about the solvency of some banks that offer money market accounts. However, the FDIC was created to allay just such concerns, protecting deposits against bank failure.

With money market accounts, you will earn interest somewhat higher than with a regular savings account, typically in exchange for a higher minimum balance. This combination makes money market accounts ideal vehicles for parking your home purchase funds. With most money market accounts, you can make a certain number of free withdrawals via check or an ATM in a given period.

Deposit Insurance for Your Money Market Account

The FDIC will protect your funds up to its standard maximum deposit insurance amount, which is currently $250,000 through 2013. This per-depositor limit applies to your total deposits in all types of accounts in all the branches of one bank. Add up the amount in your money market account and in any checking account, savings account, and CDs that you have with the same bank so you will know whether you will be over this insurance limit.

The FDIC allows separate insurance if you have funds in more than one of these types of accounts:

  • A combination of checking, savings, NOW, certificate of deposit, or money market accounts owned by one person
  • IRAs, 457, and self-directed 401(k) or Keogh retirement accounts
  • Joint accounts owned by people who have signed a signature card and who have equal rights to withdraw funds
  • A revocable or an irrevocable trust
  • Pension, profit-sharing, or other employee benefit plans
  • Corporation, partnership, or unincorporated association accounts, which are insured separately from personal accounts of stockholders, partners or members.

When you've identified the best mortgage rate at ShopRate.com and are ready to move ahead with your home purchase, your money market funds--protected by the FDIC--will be ready and waiting.

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