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Money Market Accounts and Rates
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Money Market Accounts and Rates

Money market accounts offer the depositor access to rates offered by the wholesale money market, typically through the treasury department of their clearing or merchant bank.
The rates paid should reflect wholesale money market rates represented by London Interbank Offered Rate (LIBOR) - established daily as a summary of actual rates offered in the money market between banks.

Money market deposits offer advantages

* Responsiveness. They respond immediately to changes in interest rates - good when interest rates are rising
* Flexibility. The length of a money market deposit - its term - can be chosen from a day up to about a year
* Return. Money market rates should generally higher than deposit account rates offered by the same bank
* Convenience. Once the money market account is set up, a telephone call can establish, change or end a placement
* Control. 'Rolling over' your money market deposit means that the deposit can be automatically renewed each time it matures; this can include the interest accrued. This is particularly useful if you expect to need the savings at short notice, but don't know when.

Disadvantages however are:

* Commissions. Market market commissions charged by banks appear to vary significantly - the money market rate offered by one bank need not be the same as that offered by another.
* Availability. Daily rates are decreasingly being published on the web, so it is difficult to compare the money market rates from different banks
* Competitiveness. Money market rates can seem unattractive when compared with other forms of deposits, from instant access to bonds, offered by other Institutions.
* Minima. Minimum money market deposits seem typically to be around 25,000



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