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How to Choose a Money Market Account

    By now, you probably know that money market accounts hold a few advantages over CDs and traditional savings accounts. At this point, you’re down to comparison shopping to find the best fit for your needs. We’ve created this list of five tips to help you choose the money market account that suits you:

    Look at the minimum deposit requirement.

    This might as well be your first step, because you’ve likely already determined the amount of money you have to deposit. When shopping, look for accounts that can be opened with the amount of cash you’re ready to put down.

    The more money you’re willing to deposit, the more options you’ll have, so if you’ve limited yourself too much to find a quality account, then don’t rule out saving up a bit more first.

    Some banks will allow you to open a money market account with as little as $100, but the interest rates are abysmal.

    Now, look at the balance requirements.

    So you’ve got enough money to open the account, but do you have enough to keep the account running without slowly bleeding revenue?

    Most money market accounts have a minimum balance requirement and if you drop below that threshold, you’ll be charged a penalty. Make sure you choose an account that gives you the amount of “wiggle room” you need.

    What about transaction limits?

    Speaking of wiggle room . . . if you think you’ll be making regular withdrawals from your money market account, you’ll need to think about the transaction limits before making a choice.

    The federal government regulates this limit to six transfers per month, and if you exceed this you’ll either be hit with additional fees or have your account closed altogether. Check with the issuing institution and learn what their policies are.

    Compare the interest rates.

    Once you’ve narrowed down the selection to accounts that you’re able to open and maintain, then you have to choose the one that yields the best annual return. Online money market accounts and those issued by credit unions can generally offer the best interest rates.

    When shopping, be wary of special promotional interest rates which will usually drop down after the introductory period concludes.

    Finally, vet the institution itself.

    Remember that opening a money market account is entering you into a long-term relationship with the issuing institution. Whether it’s a bank or a credit union, you’ll want to make sure that you’re shaking hands with a reputable and trustworthy business.

    Make sure that the institution’s money market accounts are insured (usually through FDIC or NCUA) and that they have plenty of positive customer feedback online.

    What is a money market account?

    A money market account is much like a savings account, but it offers higher interest rates and carries more restrictions. Among those restrictions are transaction limits that are regulated by the federal government.

    Do money market accounts earn more interest than savings accounts? How about CDs?

    As a general rule, money market accounts have a higher Annual Percentage Yield (APY) than a savings account. A money market account will have roughly the same APY as a very short-term certificate of deposit (~3-month term), but will have a lower interest rate than most other CDs.

    Do I need a minimum deposit for a money market account?

    You almost always will. The amount of the minimum deposit varies depending on the issuing institution and the type of account. Some banks will allow you to open a money market account with as little as $100, but the average minimum deposit is usually $1000 or more.

    Are there fees or service charges I should watch out for?

    Some banks and credit unions will charge service fees, so you should check with them before opening an account. Most of the institutions that charge a service fee will waive the fee if a certain minimum balance is maintained. You should also look for fees and penalties that are assessed if you exceed your transaction limit.

    Can I write checks with a money market account?

    A majority of money market accounts will include checks, but not all. You must find out whether or not this feature is included in your specific account.

    How are money market accounts better than certificates of deposit?

    The primary advantage is that you maintain some access to your money. Even though money market accounts limit the number of transactions you can make each month, most CDs won’t allow you to access the money at all until the certificate reaches maturity.


    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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