For those that don’t know, a money market account is a form of savings account offered by a bank or credit union. The major difference is for the most part and under most conditions they offer better interest rates than a regular savings account. With Ally Bank that’s the case, and their solid interest rate and other very competitive parameters for their money market account make it a great place to put your money you want to keep safe or build a nest egg and protective moat around.

A money market account isn’t to be confused with a money market fund, which is a mutual fund that invests in low interest rate securities.

Anyway, as far as the Ally Bank money market account, you can even open an account with $0.00, and of course once you make your first deposit, start earning its high interest rate of 1.55 APY (as of this writing). This makes it a great money market account for new customers as well as old, along with those just starting out in their savings strategy as well. Many other banks require a much higher deposit to meet their best interest rates, which for the most part, are lower than Ally Banks at this time.

Here are the guidelines of Ally Bank’s money market fund as listed on their web site:

• Open with $0
• No minimum balance
• No monthly fees
• Check card and first 50 checks are free
• No ATM fees — if another bank’s ATM charges you a fee, we will refund the first four, up to $6 per month
• Daily compounded interest for maximum earnings
• FDIC insured Maximize your coverage
• Six transactions per statement cycle with no fees. Why only 6
• Your actual variable rate will go into effect when you make your opening deposit

Do keep in mind that by law you can only withdraw or transfer from your account six times in a statement cycle (monthly), so you could get charged a fee if you go beyond that with most banks, including Ally Bank.

But the point of savings in the form of money market fund is to save, so it shouldn’t be a problem for anyone to keep under that figure. After all, that’s the reason we should have a checking account.

Still, this is a really good way to save, and the Ally Bank money market account is one of the best in the country at this time.

With the names sounding so similar, a money market account and a money market fund can be confusing at times to many people, and considered a different name for the same investment vehicle, when in reality they’re very different in spite of similar sounding names.

For a money market account, this is a savings account banks or credit unions will offer to their customers, where the difference is it’ll have a higher interest rate based on higher minimum balance requirements than a passbook savings account would, which usually has no minimum balance requirements.

A money market account’s funds will also be backed up by the Federal Deposit Insurance Corporation (FDIC), for up to $250,000 at this time, which could be brought back down to the normal $100,000, once the temporary higher protection may be lifted.

Another element of the money market account is you can only make up to six withdrawals a month, and in some cases also have check writing privileges of three a month for the account. Fees can be applied if you go beyond the limitations of the terms of agreement, so they should be read and understood so you aren’t charged unnecessary fees.

If you belong to a credit union, your capital in a money market account would be protected by the National Credit Union Administration, which is also a federal agency.

A money market fund on the other hand is a mutual fund which invests in short-term securities like U.S.Treasuries, commercial paper and CDs, among a number of others.

Although a money market fund has no guarantees for you capital, they rarely fall below their net asset value, although a recent case happened when it did, when Lehman Brothers collapsed last year and people lost money in their money market fund accounts. This is extremely rare, but it can happen.

Of course the slightly higher risk comes from slightly better returns.

Either one of these accounts should be used to place your backup capital for emergencies, where you can get almost immediate access to your money.

The trade-off between the two is a little less interest with absolute guarantee for your money in a money market bank account, while the money market fund will normally give you a better return with a little more risk, and no guarantee of your money.