Opening a savings account is not the only option for earning interest on your money. Money market accounts are another popular option for growing your savings. Banks, credit unions, and other financial institutions may offer them.
Money market accounts have similar features to checking and savings accounts, almost like a hybrid, but with a few key differences. You earn interest, generally more than you do with a savings account, to keep a higher minimum balance in the account.
You can make up to six monthly transfers and/or withdrawals like you can on a savings account. These transactions include transferring money between accounts, writing a check, and making debit purchases. Financial institutions can charge a fee to customers who make more than six transactions.
Money market accounts share some checking features, such as the ability to write checks from the account. They may also include a debit card for purchasing or accessing money from ATMs. However, there are transaction limitations imposed on Money Market accounts that limit the frequency with which you can transfer funds.
Why Choose a Money Market Account?
If you want to earn more interest on your money you can with a savings account, a money market account might be the right option. One thing to remember is that the interest rate is typically variable. That means that the interest rate can change at any time.
Certificates of deposit generally offer higher interest-earning features, with fixed rates, which provide stability. However, your money is held with the financial institution for a period of time without access, and if you decide to take the money out, there is a fee or loss of interest. This “term,” or period the money is held for, can range from as little as three months to five years. Money market accounts have more liquidity, and you can access your funds more often when needed.
The money you put in a money market account is insured up to $250,000 per depositor by either the Federal Deposit Insurance (FDIC) or the National Credit Union Association (NCUA). FDIC-member banks receive FDIC insurance, while credit unions have coverage through the NCUA.
How a Money Market Account Can Be Used
These accounts can be used for several different savings goals. For example, if you ever encounter unexpected expenses, you could use one as an emergency fund separate from your other accounts. If you plan to buy a house in the next one or two years, a money market account may be a good option for a short-term saving goal.
What to Look for When Opening a Money Market Account
Be sure to shop around when looking at different money market accounts. Find out the interest rates for each account, as they can vary from bank to bank. The interest rate might be higher for larger balances on money market accounts. There’s usually a minimum balance requirement for opening and maintaining an account, so ensure you’re comfortable meeting this minimum.
Finally, make sure you look at all possible fees tied to these accounts, including maintenance fees, a penalty fee for exceeding the six transactions allowed each month, and a fee if your balance falls below a certain amount.
Once you’re ready to open a money market account, NASB offers high-performing options. Call us at 800-677-6272 today to learn more about these accounts.
