The Federal Deposit Insurance Corporation, the FDIC, is an independent federal government agency that provides monetary protection of certain types of deposit banking accounts. In return for these protections, banks must follow FDIC mandated regulations. One type of regulated account is a money market account. These accounts offer you the convenience of a checking account, but with interest rate return benefits as long as you follow specific withdrawal limitations.
Insurance Regulations
The FDIC limits the monetary coverage of money market accounts to $250,000. The coverage insures that if your bank goes out of business or becomes bankrupt, your money will be returned by the FDIC. This limit is valid through Dec. 31, 2013, when the rate will reset to $100,000. If you have more than $250,000 in your money market account, the excess value could be lost if your bank becomes insolvent. This limit applies per account and you can have multiple money market accounts with the same coverage level.
Withdrawal Regulations
You can make withdrawals from your money market account six times every period. The period time frame can vary per bank, but generally the period is between four and six weeks. The FDIC mandates these withdrawal limits to help ensure the stability of the bank's total reserves. Some banks increase the withdrawal restrictions by imposing limits per withdrawal method. For example, some financial institutions limit money market account withdrawals by check or by ATM to less than the FDIC allowed six per period. In addition to manual withdrawals from your account, automated withdrawals, such as mortgage payments, count toward the withdrawal count limits.
In addition to the federal banking regulations, you may face additional bank-imposed restrictions on your money market account, such as account minimums. You may be limited to only withdrawing funds that are above account minimums, or you may incur fees for withdrawals that place your balance below the minimum threshold.
Violation Regulations
You risk losing your money market account status if you withdraw funds from your account more than six times per withdrawal period. The FDIC mandates banks to either prevent you from taking out money after six withdrawals, or have a policy that regulates violations to the withdrawal limits. Most banks use a policy that will send you a written notification after you exceed your withdrawal limit with a warning about potential account suspension or account modification to a standard checking account if you continue to violate withdrawal regulations.
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