Money market account: what is it and should you have one?
A money market account offers you a great way to earn interest on your savings, but what it it exactly? Here's everything you need to know about MMAs.
Your guide to money market accounts
Everyone has heard of a money market account, but few people understand it and why they might want one. They can be a great way to save for short-term goals!
But before you open one, you should know a few things. Keep reading to learn more about money market accounts and whether or not they’re right for you!
What is a money market account and how does it work?
A money market account, or MMA, is similar to a savings account. But this interest-bearing account usually pays higher interest rates than regular savings accounts.
Banks and credit unions typically offer MMAs.
It combines the benefits of both savings and checking accounts and requires account holders to maintain a higher minimum balance in exchange for a higher interest rate.
They allow customers to have a debit card for cash withdrawals, transfers, and deposits. Besides the debit card, clients can also write checks.
However, financial institutions often set limits for transactions, typically six purchases and transfers per month.
This type of account is a safe investment. It can be a great way to save money for a shorter-term goal, such as saving up for a vacation, and the down payment for a car or a home.
Still, before applying for a money market account, it is essential for you to fully understand how it works and compare its pros and cons.
Below, let’s compare the benefits and drawbacks of having MMAs.
MMAs offer better rates! If we compare it to a savings or checking account, a money market account will offer higher interest rates for keeping your money in the account.
Another great benefit of this type of account is easier access to funds. You can use your debit card or write a check to get the cash you need from your account.
It can be extremely helpful, especially on a rainy day. Moreover, Money market accounts are a safer place to put your money! FDIC or NCUA insures the amount you save on the account.
With a money market account, you will face some restrictions regarding transactions. Financial institutions usually set a specific limit for transactions per month.
Since money market accounts offer higher interest rates, they can require a higher minimum deposit and balance to ensure account holders can access better APY.
In addition, MMAs might offer lower rates than some high-yield savings accounts.
What is the minimum deposit requirement?
Financial institutions will require an initial deposit to open your money market account.
In this type of account, the minimum deposit is usually higher since it offers higher interest rates to customers.
The minimum deposit requirement will vary depending on each bank or credit union’s conditions. The minimum requirement can range from $5,000 to $10,000.
What is the difference between a money market account and a regular account?
As noted, the MMA combines savings and checking account features. Nevertheless, a money market account comes with competitive rates.
They offer higher interest rates so that clients can access better APY.
Unlike a regular savings account, an MMA offers a debit card and check-writing option. Having both options will help account holders efficiently access their funds.
Another main difference between the MMA and the regular one is the higher balance and minimum initial deposit requirements.
Also, the deposited money is insured for up to $250,000 per account owner.
How do you open a money market account?
Once you’ve learned all that is to know about a money market account, compare your options, and choose the best offer, it’s time to open your accounts.
Nowadays, you can open your money market account online, over the phone, or at a local branch.
First, you’ll need to submit your application. Like any financial product application process, the bank or credit union will require your personal and financial information.
Also, they may ask some questions, such as if you want to add a joint owner and how much you want to deposit or transfer to your account, for example.
Next, you need to complete the verification requirements. They’ll ask you to upload any necessary documentation to confirm the information you previously provided.
Lastly, once you’ve opened your money market account, you must make the initial deposit to meet the minimum funding required by the financial institution.
You can start using your account’s features when you complete that process.
Tips for managing your money market account successfully
A money market account will help you achieve your short-term goals and, with the higher interest rates, will help you save and grow your money.
Still, when it comes to finances, advice is never too much. So let’s look at three tips to help you make the best of your MMA.
Use your register to track your money
When you open your money market account, the bank gives you access to a register, in which you will record your transaction, such as withdraws and balances.
You can use it to track your finances and set your budget. After all, it is important to know where your money is going to avoid any surprises.
Keep on your account requirements
As previously said, money market accounts usually set transaction limits. So if you want to avoid paying fees, try to keep on the purchase and withdraw limits.
Also, there are some fees you must pay in case you don’t meet the minimum required balance in your account. So it’s better if you stay on the account’s minimum requirements.
Use the monthly statement of your account
Your bank or credit union will usually send a monthly statement of your account. It will show you your monthly balance, your transactions, and the interest you’ve earned.
Compare the information on your monthly statement to the information on your register. This way, you’ll make sure all the data is correct. And if there is any mistake, you can try to correct it!
Money market accounts can be great if you want to save money. However, there are different options in the market, so don’t apply for the first one you find.
Shop for the best features and interest rates before opening your MMA.
If you want another option for you to save money and make it grow, we have the right article for you! Read the following post and learn how to start investing today! Let’s go!
About the author / Beatriz Vieira
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