Basically, what is happening is the money that you put into the money market account is being used by the bank to make investments such, as loans on homes, cars, and even stocks, and bonds. Most people do not utilize these accounts unless they are financially savvy. However, each month because they are using your money, they are giving you a small amount of interest as payment for using your account. Depending on how much money you have in the account you can earn different tiers in interest.

Most money market accounts pay a higher interest rate than regular passbook savings accounts and often include check writing and debit card privileges. They also come with restrictions that make them less flexible than a regular checking account. They are important for calculating tangible net worth.

You don’t have unlimited access to your savings with an MMDA, but you can traditionally write a certain number of checks each month or even use a debit card to get money out (e.g., up to six times per month). Your account also grows safely if your provider is insured by the FDIC (up to the legal limit). The more money you have in the account the more interest you can earn on the account. Another important thing to remember is that you need at least $5000 for the account to be effective. If the money is lower you will incur fees.