Introduction: The Best Money Market Rates Compared to Average Money Market Rates
Traditional wisdom says that if you have a few extra dollars saved up, you should place that money in a savings account.
While there are perks to opening a regular savings account, the less known money market account offers money market rates that are much higher than your traditional savings account.
It is important to find the best way to make your money work for you. Money market account interest rates are some of the best guaranteed interest rates on the market. Furthermore, the best money market rates are offered by a number of different banks, both locally and online.
If money market account rates are higher than traditional savings accounts and if the best money market rate is offered by several banks, why do so many people still choose to place their money in a savings account?
Finding the Highest Money Market Rates
In this brief article, AdvisoryHQ will introduce money market accounts with the highest money market rates.
Since many people may never have heard of the best money market account rates, we will explain in detail why you should consider placing your savings in an account with the highest money market rate and what to look for in an account with the best money market rate.
We will then look at the current money market rate and the average money market rates before examining where you can find the best money market rate overall. We will end by reviewing a few of the top money market account rates currently offered by banks around the country.
What Is a Money Market Account with the Highest Money Market Rates?
A money market account is basically a type of savings account that you open with a bank or credit union. The major advantage to these types of accounts is that money market rates are typically several percentage points higher than what a regular savings account offers.
Money market account interest rates are higher than most savings accounts because certain federal laws allow banks to invest these funds in more lucrative, safe investment harbors that promise a higher rate of return. Since the bank makes more money on your savings, they are also able to offer you a higher money market rate.
According to Investopedia.com, the best money market rates can
“[O]ffer higher annual percentage yields than savings accounts as the vehicles invest in a variety of options from which traditional passbook accounts are restricted… Money markets pursue investing deposits in vehicles such as certificates of deposit, government securities, and commercial paper that offer higher yields than are generally found in savings accounts.”
Apart from offering you the highest money market rates, these accounts also give you a limited check writing ability. The liquidity in money market accounts is similar to that of checking accounts with up to six transactions allowed per month. However, the improved money market rates and the ability to write checks usually make these accounts preferable to a regular savings account.
Why Should You Invest in an Account with the Highest Money Market Rate?
The biggest advantage to a money market account is the money market account rates. However, to be able to benefit from the best money market rates, you will generally need to have a large savings. Money market accounts with the best money market rates have strict minimum balance standards, which are almost always considerably higher than savings accounts.
In some cases, to be able to benefit from the highest money market rate, you will need to maintain a minimum balance of anywhere between $1,000 and $10,000, depending on the bank and the money market rate being offered. Typically, the best money market account rates are offered to people willing to deposit larger sums of money.
While many people may believe that the difference in interest earned between a money market account with the highest money market account rates and a traditional savings account is nominal at best, consider the following example.
The average national interest rate on a savings account is only 0.06%, according to gobankingrates.com. If you were to invest $20,000 in a traditional savings account at that national average, you would only receive $12 in interest; enough to pay for lunch at a fast food restaurant but not much more than that.
By investing that money in an account with more favorable money market interest rates, you could vastly improve your return. If you were to invest that same $20,000 in an account with the best money market rates of 1.10%, you would receive $220 in interest. That’s almost 2,000% higher interest by investing in the best money market account rates. Obviously, the more savings that you have and the more money you put into your account, the more you will benefit from money market rates.
Another important factor related to money market interest rates is that these accounts are fully insured by the FDIC. Many people confuse money market accounts with money market funds. While money market account interest rates are fully insured and guaranteed, a money market account is not guaranteed.
While money market account interest rates won’t compare to the possible return on investments offered by riskier investment options such as the stock market, they are particularly attractive during times of economic uncertainty and volatility in the stock market. For people who are looking to benefit from the highest money market rates while still having their savings fully secured, a money market account is one of the best options available.
What to Search for in the Best Money Market Account Rates
Obviously, when shopping for the best money market account, the money market interest rates are usually the most important factor. Money market account rates do differ widely from bank to bank, so it is important to search for the best options available to you.
Furthermore, even the best money market account rates won’t do you much good if you have very little liquidity in your account. While most banks will limit you to six free transactions per month, there can be a significant difference in fees and penalties for each further transaction.
Wikipedia says that with money market rates, “banks are free to impose additional restrictions (for instance, some banks limit their customers to six total transactions). ATM, teller, and bank-by-mail transactions are not counted towards the total.”
If you feel that you might occasionally need greater access to your funds during certain times of the month, it is important to search for the best money market rates that won’t charge you an arm and a leg for every extra transaction.
Furthermore, depending on your personal financial situation, it is important to analyze the minimum deposit and minimum balance requirements. You will need to find the best money market rates for the minimum balance that you are able to maintain. While some banks may demand a minimum deposit and balance of $10,000, other banks such as PNC bank only require a $1 deposit to open an account and start benefitting from money market account rates.
Current Money Market Rates and Average Money Market Rates
Money market interest rates change with the economic situation of the country. The current money market rates are favorable, especially when compared to the almost non-existent interest on traditional savings accounts.
According to Investopedia, the average current money market rates have an annual percentage yield (APY) of 0.11% which is five percentage points higher than the average savings account interest rate.
Image Source: Best Money Market Rates
The average money market rate doesn’t seem to be much of an improvement over a traditional savings account and might actually be substantially lower than some high interest savings accounts.
However, many online banks offer money market interest rates that are several times higher than the average money market rates. We will explore some of the best money market rates below.
Where to Find the Best Money Market Rate
Since online banks don’t have the extensive overhead that comes with maintaining several brick-and-mortar branches around the country, the money market interest rates offered by online banks are usually higher than the money market interest rates offered by local banks in your region.
Depositaccounts.com offers a quality online tool that will help you to find and compare the top money market account rates. With this search tool, you can search for the best money market rates based on the minimum deposit amount starting at only $1. Furthermore, you can find money market account rates offered either nationwide or in your specific region.
Money Market Interest Rates by Ally Bank
Ally Bank is one of the most preferred online banks around the country. They offer competitive rates for all of their accounts, and the same is true of their money market account rates.
They are currently offering a 0.85% money market rate with no minimum or maximum deposit. This top money market rate also comes with no monthly fees and unlimited ATM withdrawals and deposits. Interest is compounded daily on this best money market rate, allowing you to grow your savings more quickly.
Money Market Interest Rates by Ever Bank
Another of the best money market rates on the market is offered by Ever Bank. This account offers money market interest rates of 1.11% as long as you have $1,500 to open the account and maintain the minimum account balance.
Besides offering some of the top money market account rates, this bank also offers no monthly account fee and free ATM withdrawals. If you maintain a balance above $5,000, they will also reimburse you all ATM fees from other network ATMs that you use, thus making this money market account the one with the greatest liquidity.
Money Market Interest Rates by All America Bank
The money market interest rates by All America Bank are some of the best money market rates you can find. At 1.25% interest, the money market account rates offered by this bank are hard to beat.
According to the All America Bank website, this best money market rate account also comes with the following perks and benefits:
- Monthly statements are received electronically
- FREE All America Bank® VISA® Debit Card
- FREE account (no monthly maintenance fee)
- FREE online banking
- FREE customer service
- NO minimum balance to maintain account
- Includes 6 FREE withdrawals per month**
- $5 fee for each additional withdrawal
How the Best Money Market Account Rates Can Work for You
Instead of simply settling for the average money market interest rates offered by your local bank or credit union, taking a little time to research the best money market rates can help you vastly increase your savings.
Whether you choose the top money market interest rates offered by any of the online banks reviewed here or find comparable money market account rates offered by a local bank, the best money market rates are almost always the best option for your savings.
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