Guide: Finding the Best Money Market Account
Money market accounts are obscure little savings vehicles that a lot of consumers are somewhat familiar with.
Those who have a minimal understanding of money market accounts may be at a loss to explain what the difference is between a regular savings account and a money market account.
And, finally, there are those who simply think money market deposit accounts have something to do with money market funds.
A money market account is neither a savings account nor an account connected to money market funds. Although it shares similarities with a savings account, the regulations that surrounding money market accounts are decidedly different than those that cover savings accounts. Banks have much more flexibility in terms of what they can do with the money stored in money market deposit accounts offered by their institution.
This article will go over some of the best money market accounts available to consumers. In order to effectively offer suggestions for the best money market account, it will also provide a detailed explanation of what exactly money market accounts are and what sets a money market account apart from a regular savings account.
What Is a Money Market Account? (Money Market Accounts vs. Regular Savings Accounts)
For starters, money market deposit accounts have nothing to do with money market funds. They are a completely different financial animal from money market accounts that we will not get into in this article of the best money market accounts.
To best understand what makes a money market account different from a regular savings account, let us consider what a savings account even is. A savings account is, as the name suggests, a bank account that is meant to encourage customers to save their money. In other words, they are expected to keep this money in the bank account for an extended period of time.
While this helps banks, it is a liability for them since they are technically using that money to facilitate the other transactions in their bank. Banks are limited with what they can do with savings account deposits. It is this limitation of activities that is the key distinguishing factor between savings accounts and money market accounts.
Image Source: What Is a Money Market Account?
Banks can loan out savings deposits to other customers (for credit cards, loans, etc) and receive a fixed amount of interest. If they pay the savings account holder 1 percent for the privilege of using their money and they charge the person they give the credit product to 7 percent, the bank will keep the 6 percent difference.
With a money market account, the rules are a little more flexible. Banks can make a slightly wider range of investment with the money they receive from money market accounts – but just slightly. Money market deposit accounts are considered relatively safe investments, and this would be untrue if banks were depositing money in anything as risky as stocks.
The funds deposited in money market accounts are put towards relatively safe investments that will still earn more interest than a savings account: certificates of deposit and treasury bills. Putting money market account deposits towards safe investments such as these allows the money to grow a little bigger than it would in a traditional savings account, without the risk of bigger investments in more precarious securities.
Minimum Balance and Transaction Limits for Money Market Deposit Accounts
There is another reason banks offer higher interest rates on money market deposit accounts: minimum balance requirements. In order to open a money market account, the bank will impose a minimum deposit that you have to make into its money market account and a minimum balance that you must maintain.
Furthermore, there is a transaction limit placed on savings accounts and money market accounts implemented by the federal government. Regulation D is a Federal Reserve Board regulation stating that savings accounts (this includes money market deposit accounts) cannot have more than six “convenient” transactions coming out of the account per statement cycle.
A money market account that goes over this limit of “convenient” transfers can lead the bank to close the account. Convenient transactions include things like preauthorized or automatic transfers and transfers facilitated by telephone, check or debit card. Other less convenient types of transactions or withdrawals, such as going into the bank or making a withdrawal from an ATM, do not jeopardize the status of money market accounts.
For more information on the kinds of transactions that are limited with regard to money market deposit accounts, you can review the Regulation D section on savings accounts.
The Best Money Market Accounts for This Year (Choosing the Best Money Market Account)
Finding the best money market accounts is not an impossible task. If you are open to considering a traditional money market account from a physical bank or an online money market account, you will gain access to some great high-interest money market accounts that are available.
Ally Bank Money Market Account
The biggest prerequisite for most people looking for the best money market account is a competitive interest rate. And why have it any other way? A competitive interest rate is perhaps the only reason to lock your money in a money market account.
Ally Bank offers one of the best money market accounts. Aside from its money market account, Ally Bank is already quite noted for the competitive interest rates it offers on its saving accounts. It is able to offer one of the best money market accounts due to its purely online operations. The money the bank saves on operating physical branches is passed along to its consumers – and money market deposit account holders – in the form of higher interest rates.
The increased accessibility to your money is another reason why Ally Bank is classified as having one of the best money market accounts. Customers get access to the money in their Ally high yield money market account and receive a debit card for easy access to their funds as well.
Competitive Interest Rate with the Ally High Yield Money Market Account
Ally high yield money market accounts enjoy an interest rate of 0.85 percent on all balance tiers. This allows anyone with even a bit of money to put in an Ally high yield money market account the opportunity to earn a decent amount of interest compared to their usual bank account.
Features of the Ally High Yield Money Market Accounts
Ally high yield money market accounts come with several attractive features that make them among the best money market accounts. There is no monthly maintenance fee or service charge on this Ally high yield money market account. Customers earn a higher amount of interest than they would in money market accounts from other banks.
Checks can be deposited into Ally high interest money market accounts using the Ally eCheck Deposit service. Deposits in Ally high yield money market accounts are also insured by the Federal Deposit Insurance Corporation, meaning customers can put the same amount of trust in Ally money market accounts as they would in a regular money market account.
In addition to a higher interest rate, Ally customers also make more money in their high interest money market accounts because interest is compounded daily.
Ally Bank also offers unlimited deposits and ATM withdrawals through its online money market account. That being said, additional deposits (those convenient deposits we spoke of earlier) are limited to six a month.
Any other convenient transactions over that (point of sale transactions, telephone transfers, etc) will incur a charge of $10. If this activity continues, Ally Bank is forced to close the individual’s online money market account.
If you want an online money market account with competitive money market account rates, then Ally Bank’s money market account is one of the best money market accounts you can choose.
EverBank Yield Pledge Money Market Account
EverBank is a great option for those who have a huge sum of money that they want to quickly put away for a year and earn money on. The EverBank Yield Pledge money market deposit account offers staggering money market account rates of 1.11 percent and money market account deposits of $250,000 or over.
If you have a large sum of money that you will need in a relatively quick amount of time (maybe a year), and you want it to earn some money without putting it at any risk, the money market account rates offered on an introductory basis with EverBank’s money market account is a perfect choice.
Even if you do not have $250,000 to gain the attractive money market accounts rates offered by EverBank, you only need a $1,500 balance in order to qualify for its money market account. The regular interest rate offered on its money market deposit accounts is an APY of 0.61 percent.
This is for balances of $0–$10,000,000. For those with balances over $250,000, this is the rate they will earn on their money market account after their first-year introductory money market account rates are over.
Like most of the top money market accounts, access is available through mobile apps and online. Customers can manage and monitor the funds in their money market account through their smartphone or computer.
The top money market accounts allow for easy deposits to encourage money market account holders to save through convenience. The EverBank money market account allows for online, mobile, and check-by-mail transfers in addition to setting up direct deposits.
Sallie Mae Money Market Account
The final pick on our list of the top money market accounts is the Sallie Mae money market account.
With this top money market account, you can write checks that can come directly from your money market account. Furthermore, there are no minimum deposit requirements or monthly fees on this money market deposit accounts.
This is one of the top money market accounts with great money market account rates. The interest rate on this money market account is 0.90 percent.
While Sallie Mae is more well-known for its student loans, it also offers a pretty attractive online money market account. It is very convenient to open a money market account with Sallie Mae, and you can simply open an account online.
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What Exactly Is a Money Market Checking Account and Where Can I Find One?
People often refer to money market checking accounts or try looking for a money market checking account. Technically, there is no such thing. There are just money market deposit accounts with the option to withdraw money or money market accounts that come with a debit card.
A checking account is meant for everyday spending and transactions. This is why it comes with a debit card and a checkbook with the expectation that you will be using this account for most of your purchases and expenses. This is not the expectation with a money market account.
Money market accounts are meant to encourage money market deposit account holders to keep their money in the account. In fact, Regulation D (which we addressed earlier) specifically limits the amount of convenient transactions that a money market account can make. These convenient transactions are a large part of what a regular checking account is for. As a result, there is technically no such thing as a money market checking account. People just refer to regular money market accounts as such.
Which Financial Goals Are Money Market Accounts Best-Suited for?
There are so many financial products on the market, and there are that many for a reason – because there are so many different financial needs and financial situations. Before putting your money in a money market account, consider what your savings goals are. Even the top money market accounts won’t do much for you if they do not fit your financial needs.
A money market account is best-suited for you if:
- You are saving towards a specific goal/have a lump sum of money you do not want to lose or reduce
- You want your money to earn the most it can with the least risk
If you fall into one of these two camps (or both), finding the best money market account is in your best interest. A money market account will allow your money to grow with just a little more interest than it would sitting in a savings account. It also has less risk that stocks or other securities carry, allowing you to make your money work a little without losing or reducing your investment.
The funds deposited in money market accounts can only be invested in very low-risk investments, such as certificates of deposit or government securities. You can rest assured that your money is safe. But keep in mind that a money market account works best when the money is left where it is. Do not open a money market deposit account with the intention to use it as just another checking account.
This article is meant to provide a helpful overview of money market accounts and help you find the best money market accounts for you. Use it as your guide, review your options and your personal money needs, and get to work finding the top money market accounts for you.
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