Your checking and savings accounts help you with your routine banking necessities, from making deposits to transferring funds. If you’re looking for a single account that combines the top checking and savings account features into one, you may want to consider opening a money market account.
Just like the bundled services you get from your internet and TV providers, money market accounts let you access the top features of checking and savings accounts through a single account. Your money market account also has bonus features that might help you in certain financial situations. Walk through the account benefits and the account opening process with our guide.
What Are Money Market Accounts?
Money market accounts are special accounts available at banks and credit unions. You’ll see them listed as money market deposit accounts and money market savings accounts. However, money market accounts are not money market funds or money market mutual funds.
If you have a money market account at your bank, it’s insured by the Federal Deposit Insurance Corporation. The National Credit Union Administration insures money market accounts at credit unions.
What Can I Do With a Money Market Account?
Most money market accounts allow you to transfer funds and pay your bills like you would with your regular checking account. Usually, you’ll need to use the online banking options at your financial institution when you’re making transfers and payments with your money market account. Some money market accounts might offer you a debit card so that you can withdraw cash and make purchases.
Money market accounts are primarily designed to help you build your savings. You’ll earn interest on the account balance in your money market account. Unlike regular savings accounts, money market accounts typically offer higher interest rates so that you can make more than you would with a traditional account.
The interest rate on your money market account will depend on the rates available at your bank or credit union and your account balance. On average, interest rates range from 0.08% APY to 0.11% APY. Traditional savings accounts are typically around 0.04% APY.
Money market interest rates tend to be offered with a tiered system. With a tiered system, higher interest rates are often reserved for accounts with the largest balances. Tiered interest rates encourage account holders to save more money and promote loyalty to a particular bank or credit union.
What Are the Restrictions on Money Market Accounts?
Many banks and credit unions require you to deposit a minimum amount of money to open a money market account. You must maintain a minimum balance in your account to keep your interest rate.
If your account balance drops below the minimum required level, your bank or credit union could charge you a monthly fee. Some financial institutions have monthly fees for all money market account holders, even those who meet minimum balance requirements. Other banks and credit unions will waive monthly payments if you make monthly direct deposits.
All money market accounts have limits on the number of withdrawals and payments you can make each month. The Federal Reserve sets these limits, so they’re the same across all banks and credit unions.
Currently, you can make six transactions per month with your money market account. Check, debit card, electronic transfer, and draft transactions count as part of your monthly limit. However, you can make unlimited ATM withdrawals, mail, telephone, and in-person transactions.
Would a Money Market Account Be Beneficial for Me?
As long as you can adhere to transaction limits, money market accounts can be ideal places to stash your savings. Some other high-interest savings plans won’t let you withdraw money for months or years. Money market accounts give you the convenience of being able to access and use your money much more regularly.
In addition, money market accounts have the flexibility to grow with you as your savings increase. Money market accounts reward you for saving by offering higher interest rates on your initial deposit and improved rates as your savings multiply.
You may be offered a special introductory rate when you open a money market account. Some banks have introductory rates as high as 1.41%. With the tiered interest rate system used by many banks and credit unions, even seemingly small increases in savings can add up to significantly higher interest rates.
For example, many financial institutions provide interest rates above 1% on balances above $25,000 or $50,000. You could even receive a 1.5% interest rate if you maintain a balance of $10,000 or more.
If you’re looking for the benefits of a high-yield savings account with the additional ability to write checks, choosing a money market account is preferable.
How to Open an Account
Getting the most out of your money market account involves going through a few steps to find the option that’s right for you.
Do your market research
You might have the urge to visit the bank you currently do business with or the first bank you come across in your area. However, since opening a money market account is an important decision concerning your finances, you should take the time to compare offerings.
Also, compare the different types of accounts and see whether a money market account is the best option for you.
Choose the features you prefer
Money market accounts are more than instruments that pay interest on your money. They offer withdrawals and limited check-writing privileges, so you have flexibility in how you can use your funds.
Estimate how often you will need to write checks from your account and match your check-writing needs to a money market account with adequate checking privileges.
Figure out how often you will be withdrawing funds from your account, on average. Find a money market account that allows enough free withdrawals for your monthly needs. Your goal is to avoid a money market account that allows fewer fee-free monthly withdrawals than you will make.
Compare account fees
Fees can eat away at your balance. Choosing a money market account with minimal fees attached to it is key to maximizing your returns.
If possible, try to find a bank that doesn’t have monthly maintenance fees. Accounts that don’t require a minimum balance will keep you from having to pay fees if your funds drop below the predetermined level.
If you can’t find a money market account without a minimum balance requirement, shop around for one that has a low enough requirement that you’ll easily be able to meet.
Examine minimum deposit requirements
Besides maintaining a minimum balance, banks have a minimum deposit requirement for new money market accounts. Most banks place their minimum deposit requirement between $500 and $2,500, and for many, the minimum balance you will have to maintain is the same amount.
Contact the bank of your choice
When you’ve narrowed your options down to those that meet your needs, contact them about receiving an application form. Some banks will allow you to open a money market account through the mail or online.
If you already maintain bank accounts with a particular bank, you might be able to open your money market account by speaking to a representative over the phone. Look for perks that some banks offer customers that open multiple accounts at their bank.
Credit unions can offer slightly higher interest rates than conventional banks. If you want to take advantage of credit union benefits, seek a relative that is a member and apply by filling out a paper application or online.
What to Look for When Choosing a Money Market Account
If you’re interested in saving funds for a purchase in the short term or looking to put your money somewhere, it will earn interest; a money market account is a safe choice.
Whether you want to protect your credit score by creating an emergency fund or saving for a large purchase, money market accounts are helpful tools for your personal banking.
Where Can I Learn More About Money Market Accounts?
Visit Finance is us to examine your money market account options. Our friendly and knowledgeable team members are happy to answer any questions you have about the benefits and restrictions of these accounts.
We can help you understand how a money market account fits your personal financial situation. We’ll provide guidance on minimum deposits and balances, and we will assist you with finding an interest rate that suits your needs.
Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services.