Money Market Accounts & How to Find the Best Rates
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What Is a Money Market Account?
A money market account (MMA) is a type of savings account with a few unique features like being able to write a check. The most important thing to know about a money market account is that it’s a safe and accessible place to store your money while earning interest.
What Are the Advantages and Disadvantages of a Money Market Account?
If you’re considering a money market account as a place to store your savings, be sure to weigh the pros and cons:
|MMA Pros||MMA Cons|
|You can earn interest on the cash you keep in the account.||Interest rates with some MMA might be temporary introductory rates and may drop after one month. Always check the permanent rate.|
|Your money is safe because it's insured by the FDIC. If you get a MMA with a credit union by the NCUA.||MMA can have high minimum balance requirements.|
|Your money is easy to access and you can make withdrawals at any time. Some MMA even provide a debit card.||While your cash is accessible, there is a limit to the number of transactions you can make (typically 6 per month). It normally takes 2-3 days to transfer funds to/from an MMA.|
|You can write checks from your MMA.||MMA only earns interest on the balance you keep in the account. If you don't plan on saving, it's not a good account for you.|
Can You Lose You Money in a Money Market Account?
No, you can’t lose money in your money market account. Because it’s insured, your money is protected, even if your bank fails.
Note: Money market accounts should not be confused with money market funds. Money market funds are investments which are not FDIC insured and have a risk of principal loss due to the nature of their investments.
The Best Money Market Rates for 2020
Banks and credit unions offer competitive interest rates for money market accounts. This is good news for savers because you have so many promising options.
To find the best online money market rates near you, you can use the tool below.
Money Market Calculator
If you’re looking at a list of interest rates for a money market account – and want to estimate your growth over time – use the simple calculator below.
Remember that money market account interest rates aren’t fixed. This means they can change in the future by going up and down. If the interest rate drops significantly with your account, it might be time to look into moving your savings to another MMA offering a higher rate.
Money Market vs. Savings Accounts
Both money market and savings accounts are great places to keep your emergency funds or the money for your next big purchase. In the table below, we’ve compared money market accounts and savings accounts so you can make a more informed decision for where to keep your cash:
|Feature||Money Market Account||Bank Savings Account|
|Interest Rates||Medium to High||Low|
|Insured by||FDIC or NCUA||FDIC or NCUA|
|Withdrawal Limits||Yes a max of 6 per month||Yes a max of 6 per month|
|Debit Card Access||Yes, depending on the bank||Yes|
|Minimum Deposit Requirements||High||Low|
Key Takeaway for Savings vs. Money Market Accounts
Savings and money market accounts are equally accessible (in terms of number of transactions per month), but typical bank savings accounts can be accessed more quickly/easily.
A savings account is more accessible, however, since it’s attached to a debit card and has a low deposit requirement. This is a great option if you’re saving money for the first time.
Money market accounts can offer higher interest rates, which might mean higher returns. But it also requires that you have more money to fund the account. If you have a chunk of money sitting in regular savings, it’s a good idea to consider an MMA to start earning more interest.
Money Market vs CD
A certificate of deposit (or CD) is another common place to put money away for savings. A CD is a bound deposit, which is kind of like putting a lock on your money. You agree to give the bank your money for a specific period of time, and in return, you are paid a certain interest rate.
In the table below, we compare the main features of these accounts to help you decide which account might be a better choice for you:
Money Market Account
Medium-to-high but variable
Slightly higher fixed interest rates, depending on the term.
Access to Funds
Check writing and 6 withdrawals per month
No access without paying an early withdrawal penalty.
FDIC or NCUA
FDIC or NCUA
Key Takeaway for CD vs. Money Market
If you’re saving money for a house (or even future college tuition), you might consider a CD over an MMA. That’s because a CD will typically offer higher returns. The only catch is that you can’t access the funds (without penalty) for a specific period of time.