A money market account, also referred to as a money market demand account, is a bank account that typically offers a higher rate of return than a standard, passbook savings account while still providing the depositor with federal insurance coverage by an organization such as the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). Money market accounts have certain restrictions on withdrawals and minimum balances. Different financial institutions have different requirements for opening a money market account.
Many banks will allow depositors to open a standard passbook savings account with a minimal deposit. Most banks require a substantially higher initial deposit to open a money market account, and they require the account holder to maintain a substantial minimum balance in order to keep the account open. Some banks will permit a minimum balance of as little as $500, according to Investopedia.com. But, depositors should expect to maintain a minimum balance of at least $1,000, according to Bankrate.com.
Banks and other financial institutions in the U.S. are required to report interest payments to the Internal Revenue Service, so depositors must provide a valid Social Security number or individual tax identification number. Depositors are required to provide proper identification, typically including picture identification such as a state-issued driver's license, military identification card or passport. Some financial institutions such as Nationwide Bank, require evidence of the depositor's current address and any previous addresses for the previous five years.
A signed application is usually required in order to open a money market account. Depositors who already have another account established with the financial institution may only need to sign the additional agreement, if all other information is already on file. Those depositors who are establishing a new relationship with the financial institution may have to fill out a more detailed application. Depositors who wish to fund their money market account electronically from another bank account are required to disclose the account numbers and bank information from the funding accounts. Depositors who wish to link their money market account to other accounts at the financial institution may have additional forms to fill out.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.