Jumbo money market accounts, also called jumbo MMAs, offer investors with large amounts of cash a safe place to save their money that is easily accessible and often federally insured. Since the definition of a jumbo money market account can vary from one financial institution to another, consumers should research such accounts carefully before investing in them.
The main difference between a jumbo money market account and a regular money market account is the minimum opening balance. Most financial institutions require an initial deposit of at least $100,000 to open a jumbo money market account, whereas many other money market accounts may require $100 or less. Some banks and investment firms may also require jumbo accounts to maintain a minimum balance of $100,000 at all times, or be subject to fees or reduced interest rates.
Jumbo money market accounts typically offer a higher interest rate than money market accounts that require lower balances. In some cases, the interest rate for jumbo accounts may be more than twice as high as for regular accounts. Like other types of money market accounts, most jumbo money market accounts offer check-writing privileges, generally with a limit of six checks per month. Some jumbo money market accounts also allow online transfers and ATM access.
Not all financial institutions use the same definition of a jumbo money market account. Some banks consider a money market account with a balance of at least $50,000 a jumbo account. Others do not have separate jumbo accounts, but use a tiered interest rate system, with money market accounts that have higher balances earning higher interest rates. For example, some financial institutions offer tiered interest rates for money market accounts with balances under $10,000, up to $25,000, up to $50,000, and over $50,000.
Money market accounts are different from money market mutual funds. Money market accounts, which may also be called money market deposit accounts, are federally insured and guaranteed to pay interest and not lose value. In contrast, money market mutual funds invest in short-term securities such as CDs and government bonds. Although money market mutual funds are low-risk investments that try to maintain their value, they are not guaranteed or federally insured. The FDIC insurance limit for a single account was set at $100,000, meaning that any account balance above this amount was not insured. However, in 2008 the U.S. government raised the insurance limit to $250,000. Investors with jumbo money market accounts should make sure their savings are protected by insurance, if applicable.
When looking for a jumbo money market account, investors should consider the minimum opening balance, the ongoing minimum balance required and the interest rate paid, as well as any service, maintenance or check fees. They should also find out about the check writing and online transfer privileges and limits for the account to make sure it meets their needs. Consumers can compare financial institutions that offer jumbo money market accounts using the Bankrate website linked below.