Money Market Accounts

A money market account is a deposit account that blends features of a savings account and checking account. These accounts typically earn higher interest rates than traditional savings accounts and often offer check-writing privileges and a debit card. They’re usually federally insured like other deposit accounts and are a great place to park cash that you don’t need at any particular moment but want to be easily accessible. Compared to CDs, money market accounts can be accessed more frequently (typically up to six withdrawals per month), and you don’t have to wait the same length of time for access to funds as with certificate-of-deposit products. The higher liquidity makes them a good choice for emergency or sinking funds, but they aren’t meant to be used for long-term savings.

When shopping for a money market account, look for competitive interest rates and minimal fees, such as monthly fees or transaction fees. You should also consider the amount of liquidity you need and whether you need to write checks or use a debit card with the account. Regardless of what type of deposit account you choose, remember that you can only get high-interest rates by putting your cash in a financial institution that’s federally insured by the FDIC or NCUA.

Is it a Good Idea to Have a Money Market Account?

Money market accounts are a good option for those looking to earn a little interest on their savings while maintaining easy access to their funds. They typically offer higher rates than traditional savings or checking accounts but lower than the returns offered by certificates of deposit (CDs). The interest earned on MMAs is derived from investing a portion of your account balance into low-risk investments like government securities and treasury notes. This is a good way for banks and credit unions to help fund their lending activities while allowing consumers to earn interest on their deposits.

Another advantage of MMAs is that they allow you to make multiple withdrawals per month, often up to six times. This is an important feature, as it allows you to easily tap into your savings for short-term purposes without having to pay the penalty fees associated with early withdrawals from CDs. Additionally, some MMAs come with ATM or debit cards for even more convenient access to your cash.

As with any savings or investment vehicle, it’s important to research the various options available and compare the features of each to find the best fit. When shopping for a money market account, look for one that offers a competitive annual percentage yield, check-writing capabilities, and ATM access. You should also make sure your money is insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). With the right research, you can find a great money market account to help you reach your savings goals.

What Are the Downsides of Money Market Accounts?

Money market accounts are similar to standard savings accounts, but they often offer higher interest rates and may include features such as check-writing privileges and debit cards. They typically require higher minimum balances and pay interest on larger amounts of money than standard savings accounts.

Some financial institutions limit the number of convenience withdrawals you can make each month from a money market account. While federal rules once capped these withdrawals at six per month, the government has indefinitely lifted that rule. Still, some banks and credit unions impose their own limits, and going over the limit can cost you fees.

A disadvantage of a money market account is that the account doesn’t always keep up with inflation, which can erode the value of your savings over time. Moreover, some money market accounts come with monthly fees, which can reduce the amount of interest you’ll earn.

To maximize the return on your money market account, look for an MMA that offers competitive APYs while also offering easy access to your funds. You can find many of these accounts at online banks, though some traditional banks and credit unions offer them as well. Make sure you read the fine print before opening an account to understand all of the fees involved, including any maintenance or transaction fees. Additionally, be sure to compare the APYs offered by money market accounts to those of high-yield savings accounts.