Introduction to the Best Money Market Accounts
It can be frustrating to open your monthly bank account statement and find more deductions from the various fees and penalties charged by your bank than accrued interest.
The majority of checking and savings accounts only give a pittance for interest while charging monthly fees, transaction fees, ATM fees, and a number of other charges that end up being much more than what your account gains through interest.
If this happens to you on a monthly basis, a money market account might be an alternative worth researching.
Money market accounts may very well be an option for people who are looking to earn more interest on their savings while not having all their money locked away in an account they can’t access without facing severe penalties.
The benefits of a money market account will depend greatly on the individual financial situation of each person, but it is an investment option that is often overlooked.
Image source: Pixabay
What is a money market account, and how is it different from a normal savings or checking account? In this brief article, AdvisoryHQ will define the money market account and explain the short-term and long-term benefits of a money market account.
We will then look at reasons you should consider the advantages of a money market account over other more traditional account options.
Our review will go on to answer some of the most frequently asked questions about money market accounts, including the following:
- Are money market accounts insured?
- What should I know about money market account liquidity?
- How does a business money market account work?
- What are some setbacks to a money market account?
We will end by reviewing some of the top money market accounts that you can find online.
See Also: What Is a Timeshare? Overview of Buying and Selling Timeshares
What Are Money Market Accounts?
To define a money market account, Investopedia states, “A money market account is an interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the account holder with limited check-writing ability.”
A money market account is like a regular savings account on steroids. Money market accounts generally give much higher interest rates, though they also come with a number of conditions that we will explain below.
One of the advantages of a money market account, then, is that you can make more money through interest on your savings.
Banks are able to offer higher interest rates on a money market account because they are permitted by law to invest that money in a variety of more profitable investment vehicles than with a normal savings account.
You don’t have to worry about losing money on your money market account, however, because they are fully insured by the FDIC.
Benefits of a Money Market Account
The two main benefits of money market accounts are that you can profit from a considerably higher interest rate on your money market account while still benefitting from the most basic liquidity options of a savings account.
While the interest rates on money market accounts may be similar to high-yield online savings accounts, many brick-and-mortar banks will offer higher interest rates on the money market accounts they offer than on their savings accounts.
Bankrate.com offers a helpful online tool that allows you to quickly analyze and compare the interest rates between the top money market accounts and online savings accounts. For example, through a simple search, we found that Ever Bank offered a 1.11% interest rate on its top money market account compared to the 1.05% interest rate for Synchrony Bank’s top high-yield online savings account.
When Should You Consider the Advantages of a Money Market Account Over a Traditional Account?
If you’ve been asking yourself, “What is a money market account?” chances are that you are unhappy with the low interest rate that your checking or savings account is offering. However, before transferring all your savings to a money market account, you should consider whether a money market account will work for your personal financial situation.
Nerdwallet.com considers that “the situation where a money market account is your best option is fairly specific. It’s a good choice if you want the safety of a bank or credit union, a higher interest rate, access to funds in a pinch, and the ability to write a few checks.”
If you’re searching for a way to make a quick profit, the interest rates on even the top money market accounts aren’t going to offer you a get rich-quick scheme. You’d be better off trying your luck at the stock market.
Furthermore, if you have grown accustomed to having instant and unlimited access to your savings, and if you habitually write dozens of checks each month, then the money market account liquidity might seem restrictive to you.
Lastly, since most of top money market accounts have a fairly high minimum deposit to start up the account, if you don’t have a good bit of savings, then you might not be able to start up a money market account.
Don’t Miss: ForexMentor.com Review – Learn to Trade Forex! (Training Course Review)
All-in-One Change Management Tools
Top Rated Toolkit for Change Managers.
Get Your Change Management Tool Today...
Frequently Asked Questions About the Top Money Market Accounts
If you understand what money market accounts are and want the added benefits of a money market account, first read over these four frequently asked questions and concerns.
- Are Money Market Accounts Insured?
All money market accounts are fully insured by the FDIC. Even though the banks are able to invest your money in more profitable investment ventures, you don’t have to worry about losing your money.
Unfortunately, many people who question whether or not money market accounts are insured confuse money market accounts with money market funds. Whereas money market accounts are offered by banks and are fully insured, money market funds are obtainable from investment firms and mutual fund companies and are not insured.
- Money Market Account Liquidity
Everyone wants to have access to his or her savings, and one of the biggest disadvantages to putting your savings into a CD or other long-term investment is the lack of access to those funds. While you may gain from a higher interest rate, you never know when you’ll need to access those funds. Life is unpredictable, and one of the many benefits of money market accounts is that you are able to write a limited number of checks each month.
While even the top money market accounts will place a limit on the number of transactions per month (usually around six), that is usually more than enough for folks who have ample money to put into a money market account.
Whereas CDs and other longer term deposit options require you to pretty much renounce your liquidity, the top money market accounts act like a hybrid between a checking and savings account, allowing you to benefit from higher interest rates while still maintaining access (though limited) to your savings.
- How a Business Money Market Account Works
Money market accounts aren’t only for individuals. Businesses can take advantage of the benefits of a money market account as well.
While every business will need to have a more traditional checking account where your money flow can easily be deposited and withdrawn for day-to-day business transactions, if your business has built up a sizeable amount of savings that is simply sitting in your checking account, you can consider opening a business money market account.
A business money market account is a great way for your company to benefit from a higher interest rate while still maintaining access to those funds for emergencies. If, for example, your business has built up a sizeable savings during the holiday season, you can transfer those funds to a business money market account to start earning profits from higher interest.
Related: Best Short-Term Investments for This Year | Investing Short Term
If, however, business slows down during some time of the year, you can still access those funds to cover business costs until things pick up again. U.S. Bank offers one quality business money market account that allows you to link your money market account to your checking account as a form of overdraft protection.
Furthermore, if you have $10,000 to place into your business money market account, you can benefit from over 500 monthly transactions, allowing plenty of money market account liquidity for your business.
Image source: Pixabay
- Some Setbacks to a Money Market Account
The biggest setbacks to opening a money market account are the minimum deposit fee and restriction on monthly transactions. For folks who live paycheck to paycheck, it may be hard to build up the savings needed to open a money market account.
Furthermore, if you’re not able to put away a sizeable chunk of money, even the top money market accounts aren’t going to leave you seeing lots of profit from interest.
If you have been have grown accustomed to having instant and unlimited access to your savings, then a money market account might not be for you. You could research interest-bearing checking accounts as another option that will offer you a lower interest rate than a money market account but with greater liquidity.
Popular Article: Online Investing | What You Should Know to Invest Money Online
Top Money Market Accounts on the Market
Almost every bank, credit union, and other type of financial institution offers money market accounts. So, how do you go about determining the top money market accounts available?
Below are three options that currently offer some of the best rates and conditions.
The EverBank Money Market Account offers a promotional interest rate of 1.11% for the first year for new customers. While this interest rate does go down after the initial year, it is a great option for people looking to earn interest on their savings for a year or less. You will need a minimum of $1,500 dollars to open this top money market account.
Ally Bank is one of the most respected online banks in the nation. Its top money market account offers an ongoing 0.85% interest rate.
One of the top perks is that while it limits withdrawals to six per month, there is absolutely no limit to ATM withdrawals, thus greatly improving the money market account liquidity associated with this bank.
Sallie Mae offers another of the top money market accounts on the market today. Its interest rate of 0.9% is one of the best out there. At the same time, there is no minimum deposit and no maintenance fees associated with the account. For people without a lot of savings who are still interested in starting up their own money market account, Sallie Mae is a favorable option.
Since Sallie Mae is also one of the leaders for student loans, college-aged students can start up a money market account to begin building savings for their future.
The Many Benefits of Money Market Accounts
For people who are wondering, “What are money market accounts?” chances are that they are looking for a bank account that combines competitive interest rates with quality liquidity. The top money market accounts today offer a combination of both of these aspects and can be a great way to manage your money.
Read More: Stockpile Reviews | Will Stockpile Last? Can It Revolutionize Wall Street?
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.