Money market account

A money market account is an interest-bearing account with no stated maturity, the account holder has daily access at any height of his credit balance. It is regulated in the EU deposit insurance in the country (see the Security section ).

Interest is credited at certain intervals, the interest rate is - in contrast to a fixed deposit - fixed not written for a specific period. The account is held purely as a credit account and can not be overdrawn. Also, it is usually not intended for the general payments system.

Interest

The stated interest rate on a savings account usually refer to one year (from the Latin per annum, per annum, abbreviated p. A.). Depending on the provider, the interest shall be paid at different intervals: monthly, quarterly or annually. The shorter these intervals, the more the compound interest effect is noticeable.

Naturally, the level of overnight rates depends on the interest rate (more precisely, the main refinancing rate ) of the European Central Bank from.

The interest rate on one days money account is significantly higher than for example that of a traditional savings account usually. This is due to the fact that many money market accounts are offered solely as an online account, resulting in lower administrative costs, which can then be passed on in the form of higher interest to the customer. Secondly, it can be named as the cause of the aggressive marketing of many financial institutions who try to ( at least temporarily ) favorable day money rates to attract new customers. Sometimes, a money market account can be opened only with a checking account and / or deposit.

Interest rate

The interest rate may change daily the bank. Thus, a money market account of, for example a time deposit, which stipulates the interest rate for a specified period is different. The ability to dispose of his money every day, the customer paid for by the lack of a guaranteed interest rate.

Chance of guarantee banks new customers a fixed interest rate for a certain period of time (usually three to twelve months). After the warranty plan, the balance will bear interest at the then interest rate.

Calculation

The specified rate of interest usually describes the nominal interest rate, ie it refers to the initial capital. The interest shall be calculated and credited at certain intervals based on the average balance.

For money market accounts exist in general only the three special cases:

• Annual credit:

• Quarterly credit:

• Monthly credit:

This is

• G ' for the amount plus interest at the end of the investment period,
• G for the average amount invested ( in the period ),
• N is the number of years and
• Z for the overnight interest rate p. a

Example

An investor wishes to € 10,000 for 1 year with an interest rate of 2.0% p. Create a.

He receives

• With annual credit:

• At quarterly credit:

• With monthly credit:

Availability

About the balances on a money market account can be withdrawn daily. This means that a part or even the entire balance can be paid on each banking day.

Often ( usually the checking account ) a referral is to a previously specified reference account possible. Therefore, it is still a delay caused by the duration of the transfer einzukalkulieren with. The running times for submitted electronically transfers are established by law and must reach the recipient within one business day. Only then can the money be, for example, withdrawn or transferred.

Chance also offers institutions are to be found that furnish an allowance account with a bank card: This can then be disposed of at an ATM using the credit. A pay function similar to a debit card but is excluded here.

Notice periods

Notice periods, by definition, do not exist in money market accounts.

Chance of use institutions the term " day money " in connection with products that are not really a money market accounts, but rather represent modern passbooks: Especially direct banks offer savings accounts that offer similar savings accounts high interest rates on their credit, however, as with a conventional bank book may only be accessed within a defined framework daily. If this is exceeded, then fall in interest penalty.

Tax allowance

Investment income, including interest payments of a call deposit account must be taxed. The withholding tax is 25%, in addition to still falls, the solidarity surcharge and possibly church tax to. Through a so-called exemption order can be the bank for income up to a certain height from the otherwise performed automatically exempt payment of the withholding tax. This can be generated slightly higher revenues because not a part of the interest for a while at the tax office, " resting ", but will continue to earn interest immediately.

Security

Therefore deposits on money market accounts are subject to deposit insurance and are absolutely safe in accordance with § 1807 of the Civil Code. In the EU, the statutory deposit insurance limit is since June 30, 2009 100% of the deposit amount, however, a maximum of 100,000 €.

About the minimum legal requirements provide banks in many countries to further backups. In Germany these are the Deposit Protection Fund of the respective banking associations that go beyond the legal requirements, protect the deposits of individual customers far. A legal right to compensation, however, bank customers have not, so the backup can be made more effective and easier (otherwise it would be an insurance policy with stricter and more costly regulations ).

However, it should be noted that banks can work around this deposit insurance when the head office of the bank is located outside the EU, only the Bank's branches in the various countries are available.

Impact on the money supply

Money market accounts do not have a life and are due on demand, so they belong to the deposits, the money supply M1, which is a subset of M2. In contrast, savings books are so-called savings deposits; that is, they have a notice period of usually three months and counting so the money supply M2, but not M1. The rearranging of funds from savings accounts to money market accounts result in a change in the money supply M1, the other monetary aggregates M2 and M3 are unaffected. Such reallocation process has thus no impact on the monetary policy of central banks.