Are Money Market Accounts FDIC Insured? (2024)

Money market accounts combine the flexibility of a checking account with the interest-earning potential of a savings account. But is a money market account insured?

The short answer is yes, money market accounts are insured by the FDIC like other deposit accounts. If you’re considering opening a money market account, it’s important to understand how this coverage works.

What Is FDIC Insurance?

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that insures deposits at member banks. Should an FDIC-member bank fail, the FDIC ensures that depositors are able to retrieve their money, up to the coverage limit. Bank failures are fairly rare, but when they happen, the FDIC steps in to protect customer funds.

The FDIC insurance coverage limit is $250,000 per depositor, per account ownership type and per institution. Coverage is aggregated for each bank. This means that if you have multiple accounts with one bank, your FDIC insurance is split across eligible deposits; but if you have multiple accounts at different banks, your deposits are covered up to $250,000 at each one.

The FDIC does not insure credit unions. Instead, deposits at credit unions are covered by the National Credit Union Administration (NCUA). NCUA coverage also protects up to $250,000 per share owner, per credit union, for each account ownership category.

What Happens If a Bank Fails?

If a bank fails, FDIC protection kicks in. First, the FDIC ensures that customers are aware of their bank’s failure. Then, it arranges to pay consumers what they had on deposit by first attempting to find another bank willing to take over accounts with the failed bank. If this isn’t an option, the FDIC pays depositors directly. All of this is done as quickly as possible.

If you were to have money at a bank that failed, you could expect one of these two scenarios:

• Your money would be transferred to another FDIC-member bank with your deposits reflecting the amount that you had insured at the failed bank
• The FDIC would mail you a paper check for the insured balance of your accounts

When deposits are assumed by another bank, consumers can usually access their money within a day. In this situation, you’re not required to keep an account with the new bank.

When a bank closes, the FDIC temporarily freezes deposit accounts to ensure that all deposits are accounted for before making payments.

FDIC Insurance Coverage Example

Say that you have a checking account, two savings accounts and a certificate of deposit (CD) account at the same bank. All of them are in your name and have the following balances:

• Checking: $4,200
• Savings: $2,000
• Savings: $10,000
• CD: $175,000

In total, you have $191,200 across these four accounts. Since this is less than the FDIC coverage maximum of $250,000, all of your money is protected in the unlikely event of failure.

Now, say that you have $275,000 in your CD account instead, increasing your total balance to $291,200. In this example, $250,000 is covered by the FDIC, but $41,200 is uninsured.

Keep in mind that coverage is applied per owner. A single owner is covered up to $250,000, but joint bank accounts may be eligible for coverage beyond this.

Are Money Market Accounts FDIC-Insured?

Yes, money market accounts are insured by the FDIC. You don’t need to take any action to activate this coverage or pay for the insurance. As long as you have accounts with FDIC-member banks, your deposits—including principal and interest—are covered automatically.

FDIC coverage applies to money market accounts you own by yourself and joint accounts. If you have a joint money market account, you and your co-owner are protected separately up to the full $250,000 coverage limit. This means that if you shared ownership of a money market account with a balance of $400,000 equally with one person, the full deposit would be insured.

Is There a Limit to How Many Money Market Accounts I Can Have Insured?

There’s no limit to the number of money market accounts you can have insured. However, whether all of your deposits are FDIC-insured depends on how many accounts you have at the same bank, the ownership type and your account balances.

FDIC insurance coverage is applied per bank. The more accounts you have at one bank, the more likely you are to exceed coverage limits. If you had three money market accounts at three different banks, you’d be insured up to $750,000 total. But if you had three money market accounts at the same bank, your deposits would be insured up to $250,000.

The FDIC has an electronic deposit insurance estimator tool you can use to calculate your combined insurance coverage for all of your accounts.

What Accounts Are FDIC-Insured?

Many types of consumer bank accounts are FDIC-insured. These include:

• Checking accounts
• Savings accounts
• Money market accounts
• CDs
• Prepaid debit cards (when certain conditions are met)

Some self-directed retirement accounts are eligible for FDIC coverage as well. These include Individual Retirement Accounts (IRAs), self-directed 401(k) plans and profit-sharing plans. Just keep in mind that FDIC insurance covers bank failures, not market losses.

The FDIC also doesn’t protect all deposits. Coverage does not apply to the following:

• Stocks
• Bonds
• Mutual funds
• Cryptocurrencies
• Life insurance policies
• Annuities
• Municipal securities
• Safe deposit boxes
• U.S. Treasury bills and notes

The difference between money market accounts and money market funds is important when considering coverage. A money market account is a deposit account you open at a bank or credit union. Money market funds, on the other hand, are a type of mutual fund you can use to invest in short-term debt. Money market accounts are FDIC-insured, while money market funds are not.

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