Money Market Account Xtra (MMAX)

What Are Money Market Account Xtra (MMAX) Accounts?

A Money Market Account Xtra (MMAX) account is a type of money market bank account. It is famous among parties wishing to put aside large installments while likewise benefiting from the insurance coverage given by the Federal Deposit Insurance Corporation (FDIC).

While the FDIC ordinarily just protects up to $250,000 per account, MMAX accounts can receive FDIC insurance for up to $5 million.

Grasping MMAX Accounts

MMAX accounts function by pooling together a network of participating financial institutions. In particular, these accounts are administered by the Institutional Deposits Corporation (IDC), which manages a network of participating banks.

Through this network, the IDC can offer MMAX accounts in which the deposited funds are really positioned in numerous accounts held at the participating financial institutions. Since each account is eligible for up to $250,000 in FDIC insurance, the MMAX account can consolidate numerous accounts to get total insurance coverage of up to $5 million.

Since MMAX accounts include coordination among various participating institutions, MMAX account holders are restricted to something like six withdrawals each month. In exchange, MMAX depositors benefit from the higher insurance limit while likewise appreciating interest income higher than most checking or savings accounts.

MMAX accounts are well known among institutional banking customers who wish to acquire higher yields than traditional bank accounts. Albeit the MMAX accounts really do involve lower liquidity than a traditional money market account, they are still very liquid compared to alternative holdings, for example, corporate bonds.

MMAX accounts additionally offer limited check-composing capacities.

Illustration of a MMAX Account

Emma is the owner of a large corporation. As a conservatively-disapproved of operator, she is careful to keep a large amount of liquid assets to assist her company with answering any short-term liquidity needs. With that in mind, she keeps cash balances going somewhere in the range of $500,000 and $1 million at her bank, XYZ Financial.

Despite the fact that Emma might have to draw down the funds to deal with unforeseen capital expenditures (CAPEX) or other unpredictable things, she normally doesn't have to withdraw from her account over and over each month. Subsequently, she can engage banking options that offer somewhat less liquidity than an ordinary bank account, in exchange for a modestly higher yield.

Hence, and as a result of her conservative outlook, Emma decides on a MMAX account rather than alternatives, for example, a traditional savings account or corporate bonds. Through the MMAX account, she can get FDIC insurance on her deposits up to a maximum of $5 million. Conversely, a common bank account would just permit FDIC insurance up to $250,000. Besides, the MMAX account permits up to six withdrawals each month as well as some check-composing ability. In exchange for the lower liquidity, the accounts offer a somewhat higher yield than that of a savings account — in spite of the fact that it is lower than most corporate bonds.

Special Considerations

Money market accounts are a type of interest-bearing bank account. They are normally seen as an intermediary option between more liquid and lower-yielding instruments, for example, traditional checking or savings accounts, and less liquid however higher-yielding options, like corporate bonds or debentures.

To accomplish this, money market account suppliers invest the deposited funds into securities, like certificates of deposit (CDs); government debt instruments, for example, municipal, state, or federal bonds; and commercial paper, which offers higher yields than those paid on most bank accounts.

Features

• These accounts are made conceivable by distributing the deposited funds across a network of participating banking institutions.
• MMAX accounts ordinarily pay interest that in the middle between that of a savings account and a corporate bond.
• A MMAX account is a type of bank account that permits depositors to appreciate FDIC insurance of up to $5 million.