Money Market Current Account

A UK money market current account, as currently offered by UK banks, is a hybrid account which is a cross between a checking account and a deposit account. In effect, the account pays higher rates of interest than is the case with regular checking accounts.

 

In most cases it will also pay a higher rate of interest than a regular savings account. However, to gain this benefit you pay to pay a penalty, and the penalty in this case is that you are limited to the number of cheques you can issue in any given period.

Currently the standard amount of cheques most UK banks will allow you to issue on a money market current account in any given period is 6 per month.
In addition to requiring customers to limit the number of cheques they can issue, a money market current account also requires customers to maintain a minimum balance on the account. In the event that the customer fails to maintain this minimum balance, or issues more cheques in any given period than is permitted, the account will revert to a standard cheque-book account.

So, as you can no doubt see, UK banks offer money market current accounts to what are know as high net-worth customers, i.e. those who have a large amount of money that they can place on deposit, but still have some form of access to.

Money Market Deposit Account

Money market deposit accounts are also known as money market fund accounts.

Essentially this are either fixed term or notice accounts where the customer agrees to deposit money either for a fixed period, or notice period, and the money is then invested in the UK stocks and bonds. In most cases this investment is in what is known as “blue-chip” stocks (a sort of Fortune 500 company like Microsoft) or government treasury bills.

The return on these is what the customer will derive.

It should be noted then, that whilst the customer is likely to see a return on their investment, this type of account is not without risk. A classic example of how this account may go against you would be if you invested your money in the money market deposit account for a fixed period, and the maturity date just so happened to coincide with Black Monday (19 October 1987). In such an event, you could consider yourself very unlucky indeed!

Another factor to keep in mind is that money market deposit accounts require the depositor to deposit a minimum amount. In most cases this minimum amount is circa. 50,000 Pounds.

As can be seen then, money market deposit accounts can be a very useful way of saving, especially if you think the stock exchange and investment climate is going to be very bullish. It is not the type of account for the feint hearted.

 

Incidentally, you cannot keep depositing money monthly into this account once the deposit has been fixed, so it is not really a useful investment tool for budgeted savings. It is, however, a very good means of saving if you have just had a one-off financial windfall, say an inheritance or premium bond win!

 

 

Useful Related Sites:

UK Bank of England - Information on UK Banking from the Bank of England

FSA - Financial Services Authority - Help and advice on money matters.

London Stock Exchange - The London Stock Exchange is at the heart of global financial markets.