Opening a savings account is not the only option out there for earning interest on your money. Money market accounts are another popular option that often people choose to grow their savings. Banks, credit unions, and other types of financial institutions may offer money market accounts.
Money market accounts have similar features to both 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, for keeping a higher minimum balance in the account.
You can make up to six transfers and/or withdrawals per month like you can on a savings account. These transactions include actions like transferring money between accounts, writing a check, and making debit purchases. This limit is due to the Federal Reserve’s Regulation D. 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 making purchases or accessing money from ATMs. However, there are transaction limitations imposed on Money Market accounts that limit the frequency in 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 keep in mind 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 you with stability. However, your money is held with the financial institution for a period of time with no 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 or as long as five years. Money market accounts have more liquidity where you have access to 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 the 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. You could use one as an emergency fund separate from your other accounts if you ever encounter unexpected expenses. If you are planning 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 what the interest rates for each account because 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 make sure you’re comfortable being able to meet this minimum.
Finally, make sure you look at all possible fees tied to these accounts, including maintenance fees, a penalty fee for going over the six transactions that are allowed each month, or if your balance falls under a certain amount.
Once you’re ready to open a money market account, NASB has high-performing options to choose from. Learn more about these accounts by calling us at 800-677-6272 today.