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Everything you need to know about money market accounts

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Small piggy banks on ascending stacks of coins
Money market accounts often offer higher interest rates than traditional checking and savings accounts.

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With interest rates rising, you may be considering putting your money in a savings account. One option for earning more interest is a money market account, also known as a money market savings account or a money market deposit account.

If you think this might be a good option for your money, you can easily get started today. You could earn significantly more interest than the current national average.

If you’re unsure about this option, here’s what you need to know to make a more informed decision.

What is a monetary savings account?

A money market account is a type of savings account offered by a bank or credit union that often has some features of a checking account, such as the ability to pay bills and issue checks.

Money market accounts often offer higher interest rates than checking, savings and high yield savings accounts.

Since many money market accounts require a minimum balance, they can be a good option for people who want to earn more interest than a regular savings account, but still need access. quick and easy to funds. Like all types of savings accounts, the balance in a money market account should earn interest and be federally insured.

How does a monetary savings account work?

A money market account acts as a hybrid savings and checking account. There are some rules that you won’t find in other types of savings accounts.

In general, financial institutions tend to offer higher interest rates in exchange for a minimum deposit in a money market savings account. Often (but not always), the larger the deposit, the higher the interest rate and the lower the fees. Research a range of banks and credit unions thoroughly to find an account that meets your needs and has rules you can manage.

There may be some restrictions. As of 2020, federal rules no longer limit withdrawals from money market accounts to six times per month. But many banks and credit unions still limit the number of times you can withdraw from a money market account. Make sure you research all the details before opening an account so you don’t get unexpectedly charged or penalized.

How can a money market savings account help you save?

A money market account can earn you higher interest than a typical savings account. It also offers some checking account features along with easy access to funds. Money market accounts can offer higher interest without the time constraints of a certificate of deposit (CD) or savings bonds.

For example, if you’re saving for a large expense like a down payment on a house, but expect to need cash quickly, a money market account may be the type of savings account for you.

If that’s something you’re interested in, don’t hesitate. Get started today and start earning more interest on your money.

Do money market accounts make you money?

With rising interest rates, you are likely to earn more interest than you would have earned recently with traditional savings accounts. You’ll also have your money in a separate account, which experts recommend for building up emergency savings and other savings.

Unlike investments in riskier instruments like stocks, money market accounts present little or no risk. You won’t lose money even if interest rates go back down to near zero.

Money market accounts are a type of deposit account and are federally insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) for banks or the National Credit Union Administration (NCUA) for credit unions.

How is a money market account different from a savings account?

A money market account is technically a kind of savings account that offers some of the features of a checking account. It often (but not always) pays a higher interest rate due to the larger deposit required than a typical savings account.

Rates on money market savings accounts are variable, which means that factors such as Federal Reserve policy and the state of the economy cause banks to raise and lower rates accordingly. Each financial institution controls its own rates, so they may also depend on the company’s terms.

Some institutions charge a fee for falling below a certain balance or for making too many withdrawals per month, so look carefully at the terms of a money market account.

How to open a money market account?

To shop for a low minimum balance, no fees and a combination of higher interest rates, you might want to:

  • Check with your bank, credit union, financial advisor or broker first. It’s a good idea to take a close look and compare the institutions you already use.
  • Consider online banks. Online institutions tend to have lower costs than physical banks, making it easier for them to offer lower fees and higher interest rates.
  • Look at factors other than the interest rate. This includes fees, minimum balance levels and the number of withdrawals allowed per month.

What do you need to open a money market account?

Some money. If you’re just starting out and don’t have a large amount, some banks and credit unions have money market accounts that require less than $1,000 to open an account.

Advantages and Disadvantages of Money Market Accounts

There are pros and cons to opening a money market account.

Here are some benefits:

  • Interest rates/Annual Percentage Yield (APY) are generally higher than regular savings
  • Risk is low to non-existent as deposits are federally insured
  • Accessing your money can be faster and easier than other types of accounts with high interest rates
  • Many have little or no fees depending on the terms of the bank or credit union

And there are a few downsides to opening a money market account:

  • Minimum deposits could be high
  • Financial institutions often limit the number and type of monthly withdrawals
  • Lower risk means you might not make as much money as higher risk investments like stocks or real estate

If you think you’re ready to start earning more on your savings, you can explore your options now.