Money Market Accounts
Updated on March 20, 2019
If you’re looking to earn more interest on your savings, a money market account could be the best option for you. A money market account is best described as a high-interest rate savings account with checking account like features. This is because money market accounts generally come with higher interest rates than traditional ones while also providing you a debit card and checks. With a money market account, you can write up to six checks per month and use your debit card six times per month.
Sounds pretty good right? Well, there’s one catch. Most money market accounts have high minimum balances required to even open an account. Generally, money market accounts can require anywhere from $2,000 to $25,000 just to open an account and even after you open the account, you’ll need to maintain this balance in order to keep your high interest rate.
Things To Compare
If you have enough cash to meet these minimums and decide money market accounts are your best option, you’ll want to compare these key details.
Annual Percentage Yield (APY)
The clear winner for most important detail is how much interest you’ll make. This will be shown as an Annual Percentage Yield, also known as APY. APYs reveal exactly what percentage of your money you’ll get paid in interest over the timespan of a year. Typically, this yearly interest will be divided into twelve payments and added to your account monthly.
For instance, if you deposit $5,000 into a money market account offering 2% APY, you’ll earn $101 in interest if you leave your money untouched for a year. You’ll even earn a little more if you regularly add to your account. Although this amount isn’t huge, there’s no risk involved and it still beats the few dollars you would’ve made in a traditional checking or savings account.
Account fees should also be a major factor in choosing your money market account. Fees can easily wipe away your interest and should be avoided or minimized when possible. When comparing banks, you should focus on these common fees:
- Monthly Maintenance Fees. Some banks charge monthly maintenance fees just to maintain your account. Luckily, these fees can typically be avoided.
- Minimum Balance Fees. Not only will banks take away your high interest rate if you go below the minimum balance, they might also charge you a fee for it. Even though these fees can be avoided by keeping your balance above a specific amount, you’ll want to know how much you're going to be charged if your balance falls below it.
- Outgoing Wire Transfer Fees. Unfortunately, most banks will also charge you a fee each time you wire funds from your money market account to another account. Although this fee is usually not avoidable, the amount varies between banks so you should still attempt to minimize it.
- Excessive Withdrawal and Transactions Fees. According to U.S. federal law, you are only allowed a total of 6 withdrawals or transfers from your savings account per month. ATM or in-person cash withdrawals from your savings account won’t be included towards this limit. If you still manage to exceed this limit, your bank will charge you. This fee varies depending on which bank you have so you’ll want to do some comparing.
- Overdraft Fees. As much as we try to avoid these, things happen. Make sure you know how much you’ll get charged for an account overdraft.
Technology & Customer Support
The last details to compare are the technology and customer support a bank offers to go along with your money market account. Although they might not affect how much money you earn from your savings, easy-to-use technology and top-notch customer support can save you headaches when managing your account. A select few banks offer easy-to-use mobile apps that allow you to simply manage your savings while others offer live help 24/7. There are even banks that offer both! If these things are important to you, take them into consideration when choosing which bank to open your account with.
If you can meet the higher minimum account balances and desire the ability to frequently access your savings, money market accounts might be your best option. As you look to grow your savings with this account, make sure you compare the key details and choose the one that best suits your needs.