How does interest work on a money market account?

I was thinking about opening a money market account with a lcoal bank who offerse a 3month special rate of 5%. Does that mean I get 5% interest each month for the balance in the account?
How does interest work on a money market account?
This means you have to keep the money in the account for a minimum of 3 months in order to get 5% interest. After 3 months the rate probabily falls back to something lower, most likely around 3-4.5%.





Make sure you read all the fine prints. There might be penalty or really low interest rate if you withdraw early.





I suspect that the 5% rate is an annual rate. If you deposit $1000 into this money market account, at the end of the 3rd month you will have $1004.17.





Also note that interest from money market account will be in the bottom Divident section of your Schedule B, rather than Interest section.
Reply:You get 5% PER YEAR.





The rate is valid for only 3 months, after that it will be a lower rate.
Reply:5% is the APR (Annual Percentage Rate). So, the total return for 3 months is 1.25%. However, since it is a CD, so, you will be locked in and if you decide to take your money out before the end of the term, you will have to pay a penalty. Currently, I think you can get 4.4% from ING direct, 5.05% from HSBC Direct and 5.0% from Citi direct ... and all those are regular accounts i.e. you can withdraw anytime.
Reply:You're describing a short-term certificate of deposit, not a money-market account. And, no, you do not get 5% per month. Your rate is 5% annually. Over the 3-month period, you will actually receive a total of 1.25% interest on your deposit.





So, if you deposit $1000, you will have about $1012.50 in your account at the end of 3 months.
Reply:I'm not too sure cuz I don't understand but I'm guessing it means if you open up a money market account you'll get 5% interest for the first 3 months (5% each month) and then it will go back to the normal % rate it is.