Money Market Account Xtra MMAX
The Money Market Account Xtra (MMAX) is a type of bank account that allows for large deposits while also benefiting from Federal Deposit Insurance Corporation (FDIC) coverage. MMAX accounts can receive FDIC insurance up to $5 million, compared to the typical coverage limit of $250,000 per account.
Key Takeaways:
– MMAX accounts offer FDIC insurance up to $5 million.
– These accounts distribute funds across participating banks.
– MMAX accounts pay interest between savings accounts and corporate bonds.
Understanding MMAX Accounts:
MMAX accounts pool funds from participating financial institutions, overseen by the Institutional Deposits Corporation (IDC). The IDC places the funds across multiple accounts, each eligible for up to $250,000 in FDIC insurance. By combining accounts, MMAX can provide total coverage of up to $5 million. Withdrawals are limited to six per month, but MMAX depositors enjoy higher interest rates compared to checking or savings accounts. MMAX accounts appeal to institutional customers seeking higher yields and limited check-writing abilities.
Example of an MMAX Account:
A conservatively-minded corporation owner named Emma maintains a cash balance ranging between $500,000 and $1 million at XYZ Financial. She chooses an MMAX account for the higher yield and FDIC insurance coverage up to $5 million. Emma typically makes only a few withdrawals per month, making the lower liquidity of the MMAX account acceptable. The account permits up to six withdrawals per month and offers limited check-writing abilities.
Special Considerations:
Money market accounts are interest-bearing bank accounts that bridge the gap between checking/savings accounts and higher-yielding options like corporate bonds. Providers invest the deposited funds into securities such as certificates of deposit (CDs), government bonds, and commercial paper to achieve higher yields than traditional bank accounts.